Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
Does It Make Sense to Invest in Exchanges?
Well at-least for now it might.
Many cryptocurrency projects might fail badly and a very few projects might go on to become successful. A few successful projects might even become a household name in couple of years. But irrespective of that, Cryptocurrencies and Blockchain are here to stay. Anybody who has spent some time studying the fundamentals of some good projects can tell you this with certainty.
Euphoria
In a couple of years the Euphoria around cryptocurrencies and the 5x, 20x and 100x returns might die down. Just remember that nobody today brags about internet. It will be the same case for Cryptocurrencies as well. Bitcoin will be accepted as the Internet of Money and Money of the Internet. Most of the alts will also die a slow death. Those that will stay, will be because they are solving a specific problem in their industry, not just because they are cryptocurrencies. We will start looking at currencies becoming stable with gradual increase in their value which is dependent on their outcomes just like shares. There will be very less of speculation and volatility. But there is still a lot of time for that to become a reality. We will still see rampant FOMO and FUD for the next couple of years. We are still the at the early stage. Just remember this, irrespective of what time you entered the crypto world, you are still an early adopter.
The Search for the Next Sleeping Giant
There are many people who are in search of the next sleeping Giant. It is a very tough job to do as there are so many problems that new companies are trying to address and finding the right companies that will scale up is always a challenge. Personally I started with finding coins that could solve the problems that Bitcoin currently has, then I started looking at privacy coins, then I tried looking at coins which could act as platform for other coins, then I started looking at Chinese versions of successful coins etc etc
Loosing the Sleep and Peace of Mind
I have been some what successful with each of these approaches. But by the end of 2017, I saw the most crazy bull run of altcoins and it became very difficult to keep track of all the new ICOs that were happening. Thank god the craze has died. Back then I joined a couple of exclusive groups which helped me save time. But still there was a lot of overload. Of late I am concentrating on our product Highlights which is an extension to highlight and take notes. One of the reasons for it was all the hectic reading I had to do for cryptocurrencies. It was so difficult to keep track of everything I read. Our extension now makes it easier for me :P
Since I got busy with our product I was looking for things that took less dedication. During this time I thought of taking “low risk medium returns approach” to keep my blood pressure under control.
Low risk and medium returns
A brief look at the above graph and you know that the interest in cryptocurrencies peaked around 2017 end it back to normal now. Around the same time I did a simple test. I asked two questions “Have you heard of Bitcoin?”, “Have you invested in Bitcoin” in my office, friends get together and cousins get together. The answer to the first question has been mostly yes. For the second question only around 10% of people answered that they had invested in Bitcoin. This was around the time of last bull run. Though the interest might have gone down drastically now, just wait for the next bull run to see how it will spike again :P
Observation 1 : Interest in Cryptocurrencies is going to increase over the time.
Now that we know the interest in cryptocurrencies is going to increase over the time the next step is to identify the well rewarding coins. This is easier said than done. Take a look at the screenshots below and you would know what I am referring to.
This screenshot should be pretty clear to you as these are the top 10 coins today. Now take a look at the screenshot below.
These are the top 10 coins from January 05, 2014. How many of these can you identify? Not many other than the top 3 right? That is exactly my point. There are many coins in that list that were in top ten on 05, 2014 but not even in the top 30 list today. And there are many coins that were not even present back then but have made it to the Top 10 list today. So if you want to be invested in the top performing coins you have dedicate a lot of your time and resources. You should also note that established coins in the top 10 generally tend to give you low returns when compare to the new and promising coins.
Observation 2 : It is difficult to identify the coins that give you good return on investments.
Having made these two observations I was trying to see how to make the best of these two observations. I was thinking of selecting the projects which would benefit by the increase in the overall interest in cryptocurrencies but their performance is not tied to the individual projects. So the two options were either investing in Index funds/tokens like https://www.bitwiseinvestments.com/ , https://crypto20.com or investing in popular/upcoming exchanges. While investing in Index funds seems to be a good idea it has been observed that they do not give good returns compared to the portfolios of most of the active traders. Most of these index funds do not invest in upcoming coins or ICOs. Hence there returns are not that great. So the next option is exchanges.
Investing in Cryptocurrency exchanges.
This seems like a good approach to me. Let me explain why.
The exponential increase in interest in cryptocurrencies is testing the limits of many systems and portals. The big two Poloni Exchange and Bittrex couldn’t handle increase in traffic to their portals even before the Dec, 2017 bull run. Poloni Exchange was miserable in its customer support. I moved all my stash away from PoloniExchange after having a very bad experience with them. While loosing most of your stash can be catastrophic, what is worse is the customer support that just doesn’t care. Experiences like these have pushed people to start looking for alternatives. Binance and Kucoin have tried to fill this void well. I was personally rooting for Kucoin to succeed over the time but Binance pretty much grabbed the chance. I still think that Kucoin might make a come back. In addition to these I am monitoring Bitshares, Kyber Network and Cobinhood. While I have some preferences amongst these I think all five of them have lots of growth potential and will keep inching towards the top. The pace of cryptocurrency adoption is almost exponential at-least for the next couple of years. Distributed exchanges are still far from adoption. So there will be scope for all these. Once the interest moves from exponential to linear I am thinking two of these coins will be there and others might move oblivion slowly. In the mean time here are the short reviews.
Bitshares
I think that was the first distributed exchange and it was in top 10 earlier. I have bought a lifetime membership in Bitshares. I chose a life time membership as I will get 80% cashback on all my trades.
Pros
- Proven technology.
- With adoption of Steem and EOS this will get more limelight.
- There will be some sort of integration with EOS which will increase the utility of trading on Bitshares.
- It is more than an exchange. You can create digital assets of your own.
- You can run your ICOs on Bitshares.
- Bitshares is actually the blockchain or platform. https://bitshares.org/is only the front end. You can use any of the popular front ends you like. If you are a security freak and want to run your own, you can download the exchange from https://bitshares.org/download/ and run it on your own. This way you can avoid the DNS attacks as well.
Cons
- Bad UI
- Low volumes.
- No authentic mobile app.
Ideally I would like to do all my trades on Bitshares. But I don’t think it is ready yet. Once the UI improves and there are enough volumes and trading pairs I will move all my trading to Bitshares.
Binance
Currently majority of my stash is present in Binance exchange.
Pros
- Sleek UI.
- Low trading fees. (0.1% trading fee)
- If you have BNB, you can choose BNB to deduct 50% trading fee. It will also reduce the residue issue.
- CEO seems to have a cool head.
- They support all bitcoin forks. So you can claim you free coins for all the Bitcoin forks.
Cons
- They had performance issues. This has been fixed in last year or so.
- They reduced referral bonuses around December 2017.
- A few relevant people have accused them of charging high amounts for listing. Binance seems to have addressed this accusation well.
Kucoin
Pros
- Good UI.
- Frequent addition of Good coins.
- KCS holders get a share of all the trading fees in terms of the top traded coins on the exchange. So if you hold enough KCS it can be a good diversifying strategy. Hold enough KCS and it is like investing small amounts in the top trades coins on this exchange.
- KCS holders get preference for complaint resolution.
Cons
- There was no stop loss last time I checked.
Kyber Network
Pros
- Trustless instant trades.
- In addition to exchange it also support cross chain payments.
Cons
- The last I checked the experience was good but again the volumes and liquidity were low.
Cobinhood
Came to know about around the end of 2017 bull run. It is marketed as zero transaction fee exchange. If that is the case I am not sure why everybody is not using it. After the recent bloodbath I didn’t do much trading on Cobinhood. But looks like they have come a long way.
Conclusion
I wrote the first draft of this article in February 2018. I have updated the article based on my learning todays. One major thing is that my bet on Binance paid off. Binance which ranked 30 is not ranked 7. Though Binance is doing most of the things right, I think it is overpriced now.
What are your thoughts? Does investing in exchanges still makes sense?
Does it make sense to invest in Exchanges? was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.