Should Smart Small Investors Stay Away from Bitcoin and What are the Alternatives?

Bitcoin (BTC) is still the most popular cryptocurrency out there, but it is notoriously volatile. Its growth is characterized by a perennial spurt and stutter, making it difficult for investors to get a clear handle on it. This can be illustrated by the fact that there have been times, wherein its price has spiked, yet a crash hasn’t followed immediately (common BTC behavior). At the other end of the spectrum, there are “horror” stories like these, which might diminish your interest in Bitcoin investment as a mean of wealth creation.

So, what does this mean for small investors like you and me?

Well, there isn’t any easy answer. Technologies like blockchain (the technology underpinning BTC) are being used to make successful interventions in the Fintech industry, but does this mean Bitcoin becomes a safer investment? To answer this question, first let’s take a look at some of the reasons why BTC is NOT regarded as a safe investment:

  • Volatility – There is no predicting when this currency will go up or down.
  • Lack of regulation – There are still plenty of unregistered exchanges being used by unaware investors.
  • Transactions costs – It’s still an expensive purchase courtesy its transaction costs.
  • Not mainstream – There’s still a long way to go before reputed institutional investors get into BTC with a vengeance.

There is no doubt that digital currency is the future, and it will be increasingly accepted by retail and institutional investors alike; also stringent regulation is just waiting to happen. There is already a crackdown happening on unregistered exchanges. Taking all this into consideration, the above listed reasons, will lose their meaning in a few years from now.

Bitcoin, Ethereum and Ripple concept

But as an investor, and a small investor as that, it’s better to hedge your bets, meaning look beyond BTC and think about investing in other cyrptocurrencies.

Here’s a look at some cyrptocurrencies other than BTC that you can choose to target:

  1. Ethereum: Currently, ranked second by market cap, Ethereum, there are some ratings agencies that rank it higher than Bitcoin. As it can handle both currency and non-currency blockchain technologies, its applicability extends to plenty of business domains and processes. Also, the fact that it implements smart contracts makes for more transparent transactions.
  2. Ripple: With big name sign-ups such as Santander, UBS and Standard Chartered to its blockchain network, there is no doubt that financial institutions are warming up to Ripple. Its native cryptocurrency is XRP, and rather than it being a decentralized cryptocurrency like others, it’s a centralized currency, powered by a centralized blockchain that helps increase reliability. While there is a debate whether it should be regarded as a ‘security’ or a ‘currency’, there is no doubt that it is a viable alternative to BTC.
  3. Stellar Lumen (XLM): IBM tied up with a network of banks to facilitate cross border payments in a currency called Lumens (XLM). The fact that IBM is one of the names attached to this currency makes this a good pick. The massive gains it experienced a few weeks ago saw it reaching the sixth spot in cryptocurrency rankings.

As a 21st century retail investor, it will be a good idea to make use of the latest investment avenues for wealth creation. Cryptocurrencies such as Bitcoin and others are one such avenue and cryptocurrency exchanges backed by the latest technologies are making it easier than ever for small retail investors to make the most of cyrptocurrencies. It’s important to exploit this opportunity and not get left behind.

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