Cryptocurrencies and the Grand National

| May 27, 2018

Cryptocurrencies have shared characteristics with the Grand National

Only recently, we’ve had the 2018 Grand National at the U.K.’s world-renowned Aintree Racecourse. This year’s winner was Tiger Roll, who prevailed with Davy Russell on the saddle after a photo finish with Pleasant Company. The Grand National is the culmination of three days of first-class thoroughbred racing and remains the biggest race meeting in British horse racing. Even those who don’t tend to have an interest in horse racing are fascinated by the gruelling steeplechase with four miles of racecourse and obstacles to encounter.

In fact, in many ways, the Grand National has characteristics that are quite similar to that of the fledgling cryptocurrency industry. You might think it’s slightly bonkers to draw comparisons between two such industries but hear us out. In the world of horse racing and the Grand National, there will be a clear favourite from the outset. This will be the horse that is most fancied to go on and win the race, based on its past form and many other variables. There will also be race outsiders that are not considered to have the attributes necessary to go on and prevail at the finishing post. The price of both the favourite and the outsiders will fluctuate throughout the race, based on the sports markets’ opinion of their performance in action. If one of the outsiders is performing better than expected, its price will drop to reflect this.

All this is quite similar in the weird and wonderful world of cryptocurrencies. Although Bitcoin is the number one cryptocurrency on the lips of people around the world, there are now well over a thousand different cryptocurrencies in circulation today. In 2018’s crypto-influenced world, it’s possible to use your digital currency not just as an investment opportunity but to pay for goods and services, too. Everything from commercial flights and hotel rooms to meals out and safer and fairer games of blockchain-based poker can now be paid for at the touch of a button. But although increasing numbers of people are using cryptocurrency as a form of payment, many more are still viewing it as an asset class part of a long-term investment plan.

Think of investing in cryptocurrency as being at the start of a Grand National race. Plenty of cryptocurrencies at the start line vying for the number one position, with their values heavily influenced by supply and demand. To give yourself the best possible chance of winning the Grand National, spreading your risk across a handful of potential winners allows you to focus on more than one horse in the crowded field. Diversification is equally important in the world of trading cryptocurrencies. The high volatility of investing in cryptocurrency has been enough to put off some of the most ardent traditional financial investors, but by not putting all your eggs in one basket you should be able to mitigate your risk. As with some Grand Nationals gone by when 100/1 shots have gone on to win, some cryptocurrencies that you hadn’t considered investing in will grow in value. Nevertheless, it’s important to accept that you can’t trade every single cryptocurrency at once — success in this game, just like horse racing is a marathon, not a sprint.

Category: Special interest

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