Investing in Cryptocurrencies (PDF)
The price of one bitcoin (BTC) is approximately $650 (2/14). I expect the price of a single bitcoin to surpass $5,000 this year. There are many reasons for this, such as Wall Street money buying bitcoins (and other alternative cryptocurrencies, or ‘alt-coins’), Silicon Valley investing in cryptocurrency infrastructure, a growing number of startups devoted to the success of cryptocurrencies, and small- and medium-sized businesses accepting bitcoins to cut down on credit card fees.
A $100 investment in bitcoin at the beginning of 2013 would have yielded an approximate return of $6,000 (5,900%) at the end of the year. A $100 investment in litecoin (LTC)—the alt-coin with the second highest market cap—would have yielded a return of $30,000 (29,900%) in that same time.
Investing in alt-coins is extremely risky—a coin may be replaced by a better coin, a coin’s community may fall apart, and a number of other factors can quickly devalue a coin.
However, I believe some alt-coins will increase exponentially this year. A number of factors contribute to the success of an alt-coin: marketing and branding; community and developers; infrastructure (wallets, exchanges, etc.). Here are the coins I think have this potential:
- 42coin (42)
- Anoncoin (ANC)
- Bytecoin (BTE)
- Betacoin (BET)
- Frankocoin (FRK)
- Peercoin (PPC)
- Primecoin (XPM)
- Tagcoin (TAG)
- Unobtanium (UNO)
- Zerocoin (not yet available, as of 2/14)
I buy bitcoins through coinbase and transfer them to cryptsy, where they can be used to buy these alt-coins. After that, you can store your alt-coins offline. You’ll have to download wallets for each coin individually. Visit bitcoin.org to learn about storing coins offline.
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