Their main attractions are the low entry ticket, the promise of succulent returns, and their disruptive nature with respect to the traditional savings products of financial institutions.

Here are the secrets on how to find profitability beyond Bitcoin – for example, using a crypto trading bot and learning the ins and outs about BTC and the rest of the crypto gang.

Virtual and Decentralized

The prehistory of these virtual and decentralized currencies dates back to 1983 when the American inventor David Chaum conceived an electronic monetary cryptographic system called eCash. 

This first proto-cryptoasset was followed by other technologies and P2P money systems until Bitcoin was born in 2009. Satoshi Nakamoto is the pseudonym under which the developer or group of developers of this pioneering cryptocurrency hides. 

Others appeared later with unequal success: Ethereum, Dogecoin, Cardano, Terra, Binance Coin, Tether, Solana – and long etcetera in which there are many alternatives of ephemeral life already abandoned or inactive. 

Last year, the best-known ones moved a capitalization of close to three billion dollars and in El Salvador, they are already accepted as a real exchange currency.

Their popularity has grown exponentially in recent years, accelerated by the testimonies of striking profits that many Internet users proclaim to have obtained thanks to investing in cryptocurrencies. 

More precisely, thanks to having got the timing right for buying and selling by taking advantage of the pronounced sawteeth drawn by the graphs of their prices. It is advisable not to be dazzled by the brilliance of their percentages and numbers. 

Betting on these assets now can entail great risks and loss of money if the disadvantages are not carefully assessed.

For the investor who is approaching this world for the first time, guided by the thousands of gurus and ‘Wolf of Wall Street’ imitations that have surfaced on the Net, not considering the risks of this virtual money can result in considerable financial losses. 

High Volatility

The price reached by some of these cryptocurrencies has reached record highs that have made a lot of money to those who were able to get ahead of everyone. 

However, just as they have shown that they can soar, they are capable of plummeting at the drop of a hat. 

“They lack intrinsic value, becoming highly speculative investments,” warn multiple governments, while they remark that they “cannot be considered a good store of value or a stable unit of account.”

Volatility is not the same in all their versions and is considerably reduced with stablecoins, but not even all of them are based on fiat currencies or a commodity such as gold.

Lack of Regulation

By their very idiosyncrasy, cryptocurrencies are not dependent on any central bank. That is far from meaning that investing in cryptocurrencies is illegal except in certain countries, but they are not backed by any financial institution. 

There are some regulations in different countries, generally related to the control of tax evasion or money laundering, but no general or exhaustive rules on investing in cryptocurrencies. 

The European Commission published a draft of its “MiCA” (Markets in Crypto Assets) regulation, which outlines the guidelines to be followed by the European cryptoassets market in the future. 

It is still subject to change and is not expected to come into force until 2024.

Uncertain Future

The possible regulatory restrictions on the horizon, as well as the unpredictable evolution of prices, discourage this alternative for those who are thinking long-term and are looking for options that guarantee a financial cushion for tomorrow.

Security

Transactions are irreversible. A mistake when making a payment leads to the loss of money and the impossibility of being able to manage a refund. 

Any mistake when investing in cryptocurrencies, for example, when entering an account number, can generate a major disappointment.

Each user has a personal wallet where he stores his cryptocurrencies. The irretrievable loss of the keys of this wallet or a permanent crash of the server that hosts them can result in the definitive loss of all assets, without insurance and without the possibility of being able to recover them.

Exposure to fraud is not diluted by blockchain technology. Lovers of the unwanted are increasingly looking for more sophisticated methods to extract personal data from the accounts of those who hold cryptocurrencies. 

With one wrong click in a phishing campaign. For example, a cracker will have the opportunity to get hold of the keys needed to get hold of the acquired cryptocurrencies.

Alternatives: Deposits and Trading Bots

The good news is that there is life beyond cryptocurrencies for young investors (or investors of any age) who want to appreciate the value of the money they have managed to raise but lack a large initial capital. 

Or who do have it, but prefer to diversify it by distributing it in smaller items and thus reducing the risk.

The classic option of fixed-term bank deposits is particularly suitable for the most conservative and risk-averse. It does, however, suffer from two significant shortcomings. 

The first is that, with few exceptions, the minimum threshold required by banks is in the range of 5,000 to 10,000 dollars. The second lies in the low-interest rates. The profitability rarely exceeds 1.5% APR and in most of the offerings is below 0.60%, with a very limited term.

The so-called trading bots are becoming more and more widespread all over the web. These are automated crypto bots that use algorithms to decide when and where to but and sell.

The good thing about a trading bot is that it can be as or even more reliable than the investor’s own decisions. Of course, you have to know how to choose the right bot to get short and long term performance with cryptocurrencies.