For most small time investors the idea of investing in the likes of Bitcoin and Ethereum is a great long term plan. Another good short term plan, when done safely, is to invest in alt coins which could have large spikes at any given time. Many experts in the industry however, people who know all about this world like Robert Testagrossa, will tell you that this must be taken with caution and that there are some dangers when it comes to investing in alt coins which you should be aware of.
Here are some of the potential dangers which you may find when it comes to buying alt coins.
Sharp Rise and Fall
It is certainly not uncommon to see these coins rise sharply in price and that is what makes them so attractive. What investors have to be aware of however is that the coins will not stay up for long and as fast as they can rise, they can also fall with the same speed. This is why many will say that you should completely ignore what you have in your portfolio, because it is completely worthless until you have hit that sell button.
Because the world of crypto is largely unregulated, this leads to many creating coins which can be referred to as trash coins. These are basically coins which have no real worth or value and which are backed up by projects which are suspicious or simply not very good at all. Sadly what can happen with these coins is that the inventors of them will invest in Twitter bots that will extoll the virus of the coins to the world. This creates interest and then many people will buy the coins, basically out of FOMO more than anything else. The result is that the price pumps hard as sales go up, and when the coin hits a good price it will be sold by the inventor, who owns the large majority of the coins. The result of course is that the price dumps just as hard as it pumped, and many people end up losing their money. This is why we so often hear experts telling people to research everything about the coin and the project before they invest any money.
Against the Grain
What you will almost always find with alt coins is that they rise in line with Bitcoin. This is a great metric and a great way of trying to spot some good chances to make money, before the price rises. With this being said however, it is very common for alt coins to drop against Bitcoin, and whilst the solid BTC will stay at the same price or close to it, alt coins could hit the ground before you even know it. This makes predicting alt coin prices so hard and it is why you have to be very careful with the amount that you are going to invest.
Be careful out there guys.