Forbes: Discover Three Big Rules for bitcoin, blockchain and cryptocurrency fanaticism

nRunaway Comment: The recent surge in bitcoin prices has further increased interest in cryptocurrencies. However, most people do not understand this new thing, just blindly follow the trend. To help people better understand the cryptocurrency craze, Consultant Zach Conway wrote this article, summarizing three important rules for exploring this emerging market, hoping more people will be able to recognize the risks and emphasize the importance of prudent investment.n
nTranslation: Inan
The term Cryptocurrency was codified into the Oxford Dictionary four years ago and then often appears in conversations at places such as cocktail parties, golf courses, and more. As digital currencies unwittingly become the subject of our daily discussions, new backers plow the currency and drive up its price. In fact, digital currencies such as bitcoin use cryptography to manage new records, transfer funds and operate outside of the traditional banking system. But investors seem more concerned with price fluctuations than with the way the blockchain has successfully transformed the currency transfers in our economy. This blind fanaticism is more reminiscent of the bubble of the Beanie Babies, rather than the wave of Wall Street assets.n
Many who enter the cryptocurrency market may rely on strategists who will predict which currencies will flourish and how the broader market is moving. Unfortunately, those who claim to know the future are often contradictory. At the same time, the greedy nature of people and the fear of missing the opportunity can blind them into the area. As a consultant, I encourage everyone to identify risks, understand the purpose of digital currency better, and carefully consider the advice of so-called experts. To this end, I summarize the three major rules for exploring a cryptocurrency craze.n
Identify risksn
Before we get caught up in the temptation of good returns, we need to realize that buying digital currencies is now more like playing roulette in Las Vegas than investing in stocks, bonds or traditional currencies. While the future of cryptocurrencies may revolutionize traditional banking, blockchain technology faces many challenges before it becomes mainstream. At the moment, the buying blockchain is purely speculative, meaning that the prices of these currencies now reflect a community mentality rather than its intrinsic value. Like a Beanie Babies toy, the price of a currency could fall sharply if people’s attention shifts.n
To be honest, many currencies have little inherent value. For example, the dollar will not be more valuable than other government-issued currencies. But unlike the blockchain currency, the dollar is based on hundreds of years of economic strength and stability and thus possesses authority. Any cryptocurrency will have to struggle to that extent and face increasing government interference (such as IRS tracking) and other issues such as hacking. We should realize that these variables will only increase the risk of price fluctuations.n
Focus on technology againn
Instead, we should once again focus on understanding underlying technologies rather than just gambling on a particular cryptocurrency platform for quick monetization. The future application of the blockchain seems to have unlimited potential, and the technology has proved its worth through its avoidance of the basic functions of traditional banking, allowing buyers and sellers to exchange value without agency intermediaries. Although we have relied on private banks and central banks to control the flow of money, events such as the “Great Recession” and recent revelations of fraud have led to the loss of customer confidence in the system. Despite many challenges, this paradigm shift clearly signals the emergence of a decentralized blockchain.n
To better understand the blockchain and its associated barriers, we should not only consider its price performance when analyzing cryptocurrencies, but rather should be based on the issues of creating an operational secure platform and properly managing regulatory, tax and cyber security ability. In other words, we should focus more on cryptocurrencies that may have long-term success than on the highest-priced currency in the short term. With the proliferation of ICOs, many new currencies have entered the market as scams, designed to quickly and easily raise money instead of creating a successful and long-lasting trading system. Investors should consider using the new blockchain ETFs to enter the market to reduce platform risk and engage extensively with the blockchain.n
Do not superstitious expertsn
Each so-called expert has his own opinion on the future price of cryptocurrencies. Unfortunately, however, the arguments of these experts contradict each other and leave some inconsistent and biased information for interpretation. For example, Jamie Dimon, chairman and chief executive of JP Morgan, said it’s foolish to buy bitcoin. Meanwhile, IMF President Christine Lagarde said it would be unwise to ignore the virtual currency. We need to recognize that it is impossible for anyone to predict the future of cryptocurrencies, even though the experts are great.n
Investors should first create a global diversified portfolio rather than worrying whether cryptocurrencies should be bought. Doing so means accepting that we can not predict the future of an asset. Instead of trying to win one-time bets like we did in Las Vegas, our portfolio should reflect our goals, liquidity needs, risk appetite and timeframes. With a diversified portfolio, we can make the right investments in high-risk assets such as digital currencies so that we do not endanger our finances when there is an overall loss of investment.n
Diversified and long-term investment strategies can help us stem the urge to fear and greed, which can lead us to take unnecessary risks and make catastrophic investment decisions. Although cryptocurrencies are attractive, we need to recognize these risks and focus instead on understanding blockchain technology rather than relying on expert advice. Whether the blockchain will be the next Beanie Babies bubble or change our economy, we should all take a deep breath and discover the financial strength in a broader investment strategy, rather than being the victim of a cryptocurrency boom.n

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