The Sandbox, Uniswap, Polkadot: there is no shortage of creative names in the crypto world. There are now thousands of coins on the market. Why are there always new crypto coins added? And what risks does that entail?
On the course site CoinMarketCap, which many crypto enthusiasts use to monitor prices, shows the movements of thousands of coins – from the better-known Bitcoin (worth about $29,000 each) and Ethereum ($1,600) to unknown coins worth less than a cent. to be. New coins are added daily.
Where do they come from? “That’s because there are always new ‘blockchains’ with different objectives,” says Jeroen Blokland, founder of True Insights, an independent research agency for investors. In other words, not every blockchain – the technology on which cryptocurrencies run – is intended for a means of payment such as Bitcoin.
“Whether it is necessary to have thousands of different coins is the question.”
Jeroen Blokland, founder of True Insights
“A blockchain can be used for transactions, but also for protecting identity data. And when those creators make a new blockchain for a new application, they usually want to stick a specific new currency to it,” explains Blokland.
“Whether it is necessary to have thousands of different coins is the question. With the rapid growth of the market, makers want to do their part, or more negatively, take advantage of it by reinventing the wheel.”
Coins have a lot of attraction
Anyway: all those crypto coins do arouse interest. The Dutch market now has 1.6 million crypto investors. That appears from Crypto Investora large-scale survey that research agency Kantar Nederland conducted at the end of last year among 43,353 Dutch people aged 16 or older, 4,795 of whom invest in crypto.
“It is not yet regulated and difficult to determine the value of a cryptocurrency.”
Ralph Wessels, Head of Investment Strategy at ABN AMRO
About 570,000 Dutch people boarded last year. In addition, another substantial group is considering joining. The research bureau estimated that another 400,000 Dutch people will start using crypto this year. Blokland: “You read many success stories of investments or investments that achieve high returns relatively quickly.”
Earning money quickly seems attractive
But how realistic is that? Ralph Wessels, Head of Investment Strategy at ABN AMRO, believes that you can’t really speak of investing yet when it comes to crypto. “It is not yet regulated and it is difficult to determine the value of a crypto coin. In the stock market you have regulators, cryptoland is virgin territory. There is no watchdog. The chance that you will be scammed is many times greater than with traditional investing. And then it quickly becomes speculation.”
The fact that golden mountains are promised and that people often put in money without knowledge – sometimes without checking whether the company behind it really exists – is due to our greed, according to Wessels. “Earning money quickly is attractive to many.”
“In investing, you put money in something that grows or shows an improvement in productivity. Suppose you buy shares in Albert Heijn. Then you know what they are doing. But if you only put money into something with the hope that tomorrow it will be worth double while it generates nothing else, you have a difficult investment case.”
How to invest in crypto?
According to Blokland, what you can do if you still want to invest in crypto is to spread it. “Because it’s super volatile and it can swing in all directions, that’s how you lower the risk. You can pick a crypto platform and let it pick a number of coins. They can make sure the ratios adjust to the fluctuations. Then you don’t have to. not to do it yourself.”
“I suspect a lot of blockchains will eventually merge, but I can’t determine which coins will make it and which won’t.”
Jeroen Blokland, founder of True Insights
Blokland thinks it is impossible to say which currency will be successful and which will not. “Compare it with Amazon: in 1995 there were still 20 companies like that, but nobody knew that Amazon would be left alone. I suspect that many blockchains will eventually merge, but I can’t determine which coins will make it and which won’t. Neither does the average retail investor.”