After Bitcoin (BTC) put up a stellar performance for the first few months of the year, it had a ripple effect on the rest of the crypto market. As a result, many people ventured into the alternative cryptocurrency (altcoin) market, hoping to increase their crypto wealth. Although the market performed well with coins such as Dogecoin (DOGE), gaining up to 3,000% since the start of the year, it soon entered a bear market that saw many people suffer significant losses.
In this article, Mark Cuban, an American entrepreneur, offers advice on what to consider when selecting investments for retirement. Cuban, who has in recent times become a fervent crypto proponent, has a robust crypto portfolio that consists of 60% BTC, 30% ETH, and 10% other altcoins. The 10% share consists of digital assets like DOGE, Litecoin (LTC), and several decentralized finance (DeFi) coins, such as Sushi (SUSHI) and Aave (AAVE).
Investing in altcoins is similar to buying stocks and bonds
Cuban his crypto investments without counsel, and he advises any crypto adopter looking to do the same to conduct thorough research beforehand. According to him, investing in altcoins is similar to buying stocks and bonds or injecting funds into a private company. While he gave this similarity, Cuban cautioned that the volatile and speculative nature of the crypto market makes investments in the sector risky. To this end, it is vital to avoid copying other people’s investments blindly as this might result in massive losses.
Giving an example of why you should not invest in an altcoin simply because someone else did, Cuban shared that he had invested in a DeFi token dubbed Titan. Unfortunately, the token crashed to zero on June 16 due to the token’s algorithmic code and massive selling pressure. Although such a crash is rare in the crypto market, Cuban believes it brings out the dangers of investing in altcoins.
Experts agree with Cuban
Industry experts also concur with the nuggets of wisdom that Cuban offered. According to them, research is a vital step before proceeding to invest in the altcoin market.
Before proceeding to pump funds into an altcoin, experts advise that you should assess the reputation of a project to ensure that its coin is compliant and that its founders are credible. Apart from this, experts believe it is important to gauge the market risk of an altcoin. This involves checking the market accessibility of an altcoin to determine whether it is readily available on exchanges.
Experts also emphasize taking time to evaluate the technical properties of an altcoin before investing. While this might seem a daunting task because altcoins have varying code qualities, it is key to secure the services of a reputable auditor to review the code of the coin you seek to invest in. This step helps bring to light any faults in an altcoin’s development.
Whereas an altcoin that meets these requirements is worth putting money into, it is imperative to remember that cryptocurrencies are volatile speculative instruments. As such, you should always invest what you can afford to lose.