With a large number of cryptocurrencies listed on the coin exchanges every day, it becomes very difficult for investors to choose the right currency to invest in. In addition to this, investors are likely to turn to fellow investors who are themselves new to the crypto world, for advice. However, each investor has their own rules and principles that they use to trade in cryptocurrencies. They have their own risk appetites and things that they believe in. So, if a coin is working well for them doesn’t mean it will work for you as well. Therefore, investors must know how to evaluate the value of the cryptocurrency that they want to buy. Here is how investors can choose the right cryptocurrency to invest in.
Factors to Consider While Choosing Cryptocurrency to Invest in
Here are four important factors that you should consider while buying cryptocurrencies.
Market Cap: How to Choose the Right Cryptocurrency?
The market cap of the coin should be the first deciding factor for whether you are going to invest in the coin or not. A large market cap indicates the good value of the cryptocurrency. At present, the total market capitalization of crypto in the world is $2.79 Trillion out of which Bitcoin contributes 43% and Ethereum contributes 19.6%. This is why these coins are very safe to invest in.
Demand and Supply of the Coin
Look at the demand of the coin against the supply of the coin. For example, the supply of Bitcoin is limited to 21 million coins, out of which 18.7 million have already been mined. Now that there is only a limited supply of this coin, the prices have increased largely against increasing demand for the coin. Therefore, when choosing the crypto to invest in, look at the demand for the coin in the market and the number of coins in circulation.
Whitepaper of the Project
of the cryptocurrency outlines the key points of the project such as its vision, use cases, applications, objectives, and so on. It is very easy to find out whether the whitepaper looks realistic or not. If it does, you can go ahead and invest your money in it.
Utility of the Project: How to Choose the Right Cryptocurrency?
The utility of the project for the investors helps them in accepting the coin. If the coin has no real applications or problems that it can solve in the real world, it is going to fail because nobody wants to put their money in something that has no real value. On the other hand, a coin having several use cases and a potential to develop more over time, like , is going to be a success.
How to Choose the Right Cryptocurrency
Here are some ways to analyze the various coins and choose the right cryptocurrency to invest in.
Analyze the Community
The fan-following a coin is the best way to know about the coins. The social media community and its engagement on the social media handles of the cryptocurrency project can help you analyze whether people are really convinced about the project and its use cases. Check for genuine followers as there is no lack of fake followers and ways of buying them in the social media world. In addition to this, forums such as Reddit and Quora are extremely helpful in getting to know about things in a simpler way than confusing graphs and too many numbers. Also, if you have any questions, the users of these forums are always happy to help.
Research About the Team: How to Choose the Right Cryptocurrency?
Getting to know who is behind the cryptocurrency project is very important when choosing the right cryptocurrency. This is a necessary step to keep yourself away from fake projects which are set up only to rip off the money from people. Ask yourself a few questions about the founders of the project. For example, Who are they? Are they experienced in the field? Are they committed to the project? Do they have a proven track record of successful projects? Are they ambitious enough to take the project to newer heights?
In addition to this, once you find out the faces behind the crypto project that you are interested in, check out their social media handles like LinkedIn pages to know if they are personally invested in the development of the cryptocurrency.
Find out the Underlying Technology
The technology that is supporting the cryptocurrency is one of the most important things to look at while investing your money in that cryptocurrency. Innovative technology like that of Ethereum is sure to take the project forward and capture the attention and demand of the investors.
Read About the Project’s Vision: How to Choose the Right Cryptocurrency?
Whether you are a short-term or long-term investor, you should definitely look at the vision of the cryptocurrency project that you are going to invest in and look at the kind of culture they are trying to build in their community. See if their vision is big and clear enough to make them stay in the industry for at least 5-10 years.
Check the Pricing History of the Project
The pricing history of the project gives you an idea of how the project is likely to perform in the future and whether it will be a good investment for your portfolio or not. Making sense of complex pricing history charts may be a little difficult for you but it is totally worth it. It shows you the pattern of the highs and lows of the project so that you know if you want to invest in the cryptocurrency right away or wait till it hits its low point. Also, consistent behavior of the price tells you the ability of the coin to face the volatility of the crypto market without witnessing any significant changes in its prices.
Look at their Online Reputation
Checking out Google Reviews of everything new that we try has become our natural behavior. The same goes for cryptocurrencies. Whenever you are thinking of investing in a new cryptocurrency, make sure to look at their online reputation and how people are talking about the cryptocurrency. If the community is saying bad things about the coin, you should definitely stay away from investing in such a coin.
Navigate Through the Roadmap: How to Choose the Right Cryptocurrency?
A coin with a strong and well-defined roadmap is a must-have. To obtain long-term success by investing in a particular coin, the coin must have a clear plan for development over time. Check whether they have predefined timelines for the major updates about the project and when they are planning to increase the number of coins in circulation if there is a limited number at present. All these things when defined ahead of time show the commitment of the team behind the project which means that the project is going to last long.
Conclusion
Cryptocurrencies are still new and there is a lack of credible information regarding them. Therefore, investors should do their due diligence while researching the right coin to invest in.
