How do blockchain startups develop in the new environment? What should you pay attention to when choosing a startup to invest in? These questions are especially relevant for those who plan to invest large amounts of funds in the crypto industry. Let’s try to understand in detail all the intricacies and nuances of investing in blockchain startups.
What lies ahead for blockchain technology
First, you need to understand the legal side of blockchain projects. Blockchain is actively integrating into people’s lives: large institutional investors, venture funds and even state banks invest in digital technologies.
The adoption of cryptocurrency technologies by states at the legislative level is moving by leaps and bounds around the world. In USA, the legalization of the blockchain at the legislative level is already on the threshold and loudly knocking on the door. The popularity of digital currencies at the household level is also growing from year to year, despite the risks of volatility, business also does not stand still.
According to research by Deutsche Bank, blockchain in mass use now is very similar to the nascent internet in the 90s. This can be clearly seen from the graph of the growth curves of Internet users and the growth of active blockchain wallets. Analyzing this graph, one can see that the prospects of the blockchain are opening up from a new perspective, especially for businesses. Those who can understand and integrate the benefits of blockchain into their business earlier will be able to get more benefits, preferences and investment opportunities.
What to look for in order to invest wisely
However, 2022 is very difficult in all areas of the markets, but we still intend to grow and move on. Financial abundance is over, and unviable projects are simply dying. Self-purification of the market during a crisis is a normal phenomenon. However, hard times produce strong people. The same applies to businesses. Therefore, it is very important to correctly select projects for investment that are able to stand firmly on their feet.
We will highlight the most important points for project analysis:
- Public and experienced team;
- Fundamental financial model in White Paper;
- Live social networks of the project;
- Active audience;
- Well-developed tokenomics;
- Does the project have strong partnerships;
- Legality and legal framework of the project.
Analyzing only these points will already help you save money and make the right decision on investing in blockchain projects.
What are the best areas to invest in?
A good opportunity is to invest at a very early stage of project development. At the same time, a preliminary analysis is also carried out at least on the above points, realizing the increased risk and potential profit. I use a risk/reward ratio of at least ⅓. That is, the risk of my investment should bring 300%, if we are talking about high-risk and high-yield assets, while using no more than 5% of the total deposit amount. A properly developed risk management strategy allows you to unload your head and make decisions without emotions and unnecessary worries.
If we talk about the most reliable industries in the digital financial assets market, then these can be various infrastructure projects, blockchains, platforms, oracles, web 3 protocols – such solutions have shown good dynamics of return on investment. It is best to consider investments in fundamental projects, and best of all at an early stage.
Is it worth investing at all during a crisis? As the old Warren Buffett always says, “Buy fear, sell greed.” That is why, at least now, it is necessary to start actively studying the topic of investments, and then it is very close to a properly formed portfolio, which in the future will make you richer.