Apparently so, and it is rooted in the equities markets.
While a large number of companies that are seeking to draw benefit from the cryptocurrency exchange space is doing so through ICOs, some are already traded publicly on the more traditional US exchanges or, in many cases, over the counter.
Unsurprisingly, a number of these already publicly traded entities have made an effort to draw collateral benefit from the massive influx of both attention and capital that the cryptocurrency space is enjoying right now.
Some of these entities are justified in doing so. Many, however, are not.
If you can figure out which is which, you can gain a potentially rewarding exposure to the bitcoin and cryptocurrency space without ever having to buy, sell or own the underlying asset.
What should look out for and what to avoid?
The process a trader or an investor needs to go through when figuring out which of the companies that trade on a public exchange and claim to have some sort of link to the cryptocurrency space will, of course, vary from individual to individual. Risk tolerance, strategy, capital resources, all these sorts of things are going to dictate whether or not a trader pulls the trigger on a position or decides to move on to another player.
With that said, there are things that everyone should be looking for when weighing up a publicly traded cryptocurrency exposure. There are also, of course, certain red flags that can help an investor to identify an entity that might be trying to pick up its share of the speculative bitcoin-related capital that’s flowing into the markets right now, but the operational activity might not warrant a share of the action.
So, what should you be looking for?
First up, you want to see something specific. This may sound obvious, but this is a brand-new space (concerning technological concept) and many of the underlying aspects of the sector – how things work, what terminology refers to what, where things are going next – are brand new to even the most adept technology investor?
A company can use this knowledge gap to take advantage of an unprepared buyer. Put out the press release claiming to be the next big thing in blockchain technology, fill it with jargon that 95% of people won’t understand and you’re bound to get some takers.
Jargon is fine, but what you want to be looking for is a clear directional path.
- How is the company that’s using blockchain technology putting it to work?
- What, precisely, is the end goal?
We don’t mean just saying “we’re using blockchain technology to revolutionize the shipping industry” here; we want to see what sort of smart contract composition will be used to facilitate the automation of the part of the shipping process that said the company is trying to fix.
You should also be looking closely at the team that’s behind the blockchain integration. The bitcoin space is a relatively small community, and there are a handful of programmers and company leaders that have built up a reputation for quality in the space.
Popular bitcoin and cryptocurrency news outlet CoinDesk publish a list at the end of every year that details the top 10 most influential people in bitcoin right now. Last year’s list is available here. If any of the people on this list are involved in the company, it’s a great sign.
This isn’t to say that the absence of any one of these individuals is a red flag, but it does increase the risk associated with exposure.
Finally, you should consult the community. As mentioned, and despite the increase in what we might call mainstream acceptance of bitcoin and other cryptocurrencies over the last twelve months or so, this is still a relatively small space and the community that underpins it is incredibly tight. Use bitcoin forums and other resources (we’ll link to some of these in the
resource section of this guide) to get an idea of sentiment surrounding not just the company in question but also the technology it’s using and the goal it’s trying to achieve.
Consulting the bitcoin community is a great way to figure out, and figure out quickly, if the company is trying to pull the wool over the eyes of an investor with meaningless jargon.
Copy and paste the press release into the bitcoin subreddit on Reddit and let the community pull it apart. You’ll know soon enough if it’s nonsense or not and you’ll know without having to rest on your own technical knowledge of the space.
So that’s what you want to see when trying to evaluate whether a Cryptocurrency tradingcompany is worth investing in.