Should you invest in emerging crypto projects?
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As the crypto market developed, more projects touched on various use cases, making cryptocurrencies useful not only for borderless transactions. Tokens serve as governance for security and comprise stablecoins as a unique category, so they’re fit for endless financial and transactional possibilities.
Bitcoin was also an emerging project back in 2009, being the first cryptocurrency on the market. Since then, it has gained enough value and trust from customers to be close to adoption in the future, as countries like El Salvador established its function as legal tender, while global companies allow Bitcoin as a transaction alternative.
Since then, new crypto projects have aimed to encompass a broader perspective of what the future of finance can be. For instance, new coins, such as Worldcoin, approach the mix of artificial intelligence to address the shortcomings in the industry. The open-source protocol offers a global currency that can be used through an app for payments and transfers, leveraging the price of Worldcoin through WalletConnect technology.
But how reliable are these projects considering their newness on the market? Let’s analyze the factors determining their safety and opportunities for investment.
What is an emerging crypto project?
Cryptocurrency projects that just entered the market are emerging technologies that often propose innovative features and products that set them apart from the competition. In its early stage, such a project usually shows a massive surge in price due to massive demand from crypto enthusiasts, but the value might decline after some time.
This is usually the case for meme coins, as they attract worldwide meme fans and crypto geeks who are in love with Pepe the Frog (the inspiration for the Pepe coin) or the cute Shiba Inu dog (from which the Dogecoin project started).
In some cases, these small yet fun projects become serious and reach a considerable market capitalization. This means they gain investors’ trust, and companies start accepting them as payment options, which is the case for Dogecoin, for example.
What are the reasons for investing in these projects?
Investing in something new on the market is always exciting, especially when developers try something new. This is also why newly launched cryptocurrencies have massive potential for price appreciation in a short time. Therefore, being an early investor can bring you exponential growth in your portfolio.
At the same time, participating in innovative projects is always advantageous for investors, as they collectively support the expansion of an emerging ecosystem, whether it’s meme coins or altcoins. Such contributions allow for further innovations in new use cases and real-world solutions.
Moreover, investing in new crypto projects adds to portfolio diversification, one of the most important investment strategies. Allocating funds into new and old assets can bring balance and stability over time for long-term investments.
What are the risks of finding interest in emerging crypto?
Of course, there are some risks involved in investing in new crypto projects, considering their lack of maturity on the market. For example, investors are exposed to high volatility and price swings, which happen after the dramatic increase in value drops in an unpredictable way.
Forecasting prices of emerging projects is already difficult since there’s no way to see how they’ll perform in the future.
At the same time, the lack of a historical track record offers no basis for predictions and analysis for investors, so there’s no certainty that the project will even bring something to the portfolio. That takes us to the next issue, which includes analyzing the potential for a new project to become a scam.
There can be instances in which new crypto projects are hyped up a lot or have a professional team behind them that makes them believable but are instead fraudulent schemes. Unfortunately, the lack of regulatory landscape surrounding these projects exposes investors to many risks.
What are the signs of a fraudulent crypto project?
Whether you’re a newbie or a crypto professional, looking out for these signs before investing in an emerging cryptocurrency is always a good idea. It would be best to avoid rushing because this usually makes us prone to unfortunate decisions.
Watch out for online ads that promise high returns. It’s even more suspicious when those behind the projects contact you for an investment opportunity. If they do, always check their authorizations (if they have any) to make sure you’re not making room for interpretations.
Always take the time to analyze the project’s whitepaper before deciding on the project. Usually, a well-written cryptocurrency whitepaper is a good sign, but you can never be too sure. That’s why conducting thorough research is essential.
Not all emerging projects are worth investing in
Although investors and traders have an almost infinite pool of crypto projects to check out, not all are worth the try. While new projects are supposed to offer great returns in the short term, considering the coin’s long-term viability and use case is always a good idea. Out of an approximate 20,000 cryptocurrencies out there, only about half are active on the market, according to Statista, meaning the rest are obsolete.
Few new crypto coins pass the test of time and competitiveness, so analyze the cryptocurrency’s capacity to become a reliable and valuable future asset. Besides fancy and unseen use cases, does the coin also serve as a store of value or a borderless payment asset? Assess that before investing to ensure you’re not setting your portfolio to failure.
There are also ways to manage risks if you’re eager to invest in more new projects, such as setting clear boundaries regarding what you can lose. Profit targets and stop-loss limits are usually great strategies for reducing emotional decision-making.
What do you think about emerging cryptocurrencies?
Modern technology and development opportunities have led to the expansion of the crypto market, with developers creating unique coins based on memes or trends. Therefore, new crypto projects always appear on the market, but not all are worth the investment. Users should be cautious when choosing a certain project because some might be fraudulent scams, while others may not provide even a bit of return.
