The world of cryptocurrencies promises extraordinary returns in fractions of seconds. Although also, volatility and deceptions make it possible to lose everything invested with the same speed. What should we keep in mind before investing in cryptocurrencies?

In this note, we bring you 5 tips to take into account before launching to the conquest of these virtual coins.

1.- Know the project behind the Cryptocurrency

Before investing our money in a cryptocurrency, the first thing we should do is "the duties". All the virtual currencies and ICOs that are in the market are in themselves a project, an idea, a proposal. It is fundamental to understand and study what is the proposal behind each cryptocurrency.

Just by way of example: Bitcoin is a decentralized payment system (without intermediaries), Ethereum is a platform designed to create smart contracts, IOTA seeks to be a payment system like bitcoin but without using blockchain technology, etc.

At this point, it is important to consider whether the project seeks to be something completely new and disruptive, or the competition of an existing one.

In the first case, we should try to find those proposals that are truly disruptive and that aim to bring strong advantages for people's daily lives (think of Bitcoin as a good example of this, by proposing a payment system without intermediaries).

On the other hand, when the cryptocurrency under analysis seeks to be a competition of an existing one - such as bitcoin - it will be very important to know what the advantages are it proposes over its competitor. In short: to find "the new bitcoin" we must find a virtual currency that solves - or at least attempts to solve - the problems that bitcoin has today.

In summary, it is advisable to look for cryptocurrencies with disruptive projects or that they are an advanced and improved version of the existing ones.

2.- Know the team behind the project

This is another very relevant point, and it is related to the phrase "bet the jockey and not the horse".

Knowing the team is as important as knowing the proposal. Teams with a track record, successful projects and a history of compliance can give us the confidence to bet on them.

Although this is not always possible, since many virtual currencies have appeared from anonymity (Bitcoin is again the best example of this), it is essential to know and study the team in cases that can be done (especially in the case of ICOs). ).

Much more, if we take into account that it is a market that is not regulated and abound the dishonest projects, scams and deceptions.

3.- Issuance Policy

It is very important before investing in a cryptocurrency to know your issuance policy. I will try to keep the language as technical as possible, but for us to understand it, what we need to know is how many "coins" will be issued.

It is not the same as a cryptocurrency that has a restricted emission, one that has a fixed emission, and another that has an undefined and indiscriminate emission.

The project can be very good, the team behind it very serious, but if the issuance policy is not right we can see our money vanish in the wind.

To understand it, let's think about the following: we know that only 21 million Bitcoins will be issued throughout history (fixed broadcast). Let's think what would happen if this rule were to change, if that restriction were eliminated and 10 million bitcoins were issued for each block mined in the blockchain. What would happen? The price of bitcoin would fall in a very short time.

In short, the price of cryptocurrencies is determined by supply and demand, like any other good. Knowing the issuance policy is to understand how the "offer" of that virtual currency will be.

4.- Beware of cheating and security

We must always bear in mind that it is a market that is not regulated and there is plenty of unscrupulous people who try to take advantage of the inexperienced and uninformed investor.

Tips 1 and 2 (knowing the project and the team behind) will help us minimize the risks of falling into a trap.

However, we must always be on the alert, since many times third parties appear that, in the name of a serious cryptocurrency, seek to carry out a scam.

5.- Invest only what one is willing to lose

This is a phrase that I heard from the mouths of the most bitter advocates of bitcoin. And is that if something characterizes the cryptocurrency market is its high volatility. In simple words: investing in cryptocurrencies is risky. For those who want to know a little more about cryptocurrency exchanges, I recommend reading this note: 10topcryptobrokers.com.