As at in 2021, the cryptocurrency market has seen explosive growth like no other. With a market cap of more than $3 Tillion, cryptocurrencies have already made millionaires out of many people, including myself.
However, this is not to say that investing in cryptocurrency is easy money! It takes serious research and hard work to pick the right cryptocurrency.
But how do we decide whether a cryptocurrency is worth investing in? More importantly, how do we decide which cryptocurrency to invest in?
I’ll share with you what I’ve learnt through my years of cryptocurrency trading.
Table Of Contents
- 15 Tips on How to Decide What Cryptocurrency to Invest in
- 1. Is The Cryptocurrency Solving A Real-Life Problem?
- 2. Make Sure That There Is A Clear Roadmap
- 3. Stay Alert During FOMO
- 4. Keep Up-To-Date With Market Developments
- 5. Use Tools And Resources Such As Social Media
- 6. Market Capitalization
- 7. The White Paper
- 8. The Team
- 9. Fundamental Analysis
- 10. Technical Analysis
- 11. The Technology
- 12. Use Case
- 13. The Price
- 14. The Community
- 15. The Future
15 Tips on How to Decide What Cryptocurrency to Invest in
1. Is The Cryptocurrency Solving A Real-Life Problem?
No matter how revolutionary or innovative, no cryptocurrency will last long in the market if it doesn’t solve a problem.
This is what makes cryptocurrencies different from traditional fiat currencies. Unlike fiat currencies, which are minted into existence without any backing , cryptocurrencies are mined using complex computer algorithms.
2. Make Sure That There Is A Clear Roadmap
Before investing in any cryptocurrency, you need to have a clear idea of what you are investing in and where that currency is going to be a year from now. This will give you a much clearer picture of whether investing in the coin makes sense for you or not.
3. Stay Alert During FOMO
Moments of FOMO make cryptocurrency prices go up like crazy, which makes those who are new to cryptocurrency fall into the trap of investing in projects they have done little research on. In a market as volatile as cryptocurrency, emotions can run high. If you’re feeling tempted to invest in every single cryptocurrency you come across, it might be time to take a step back and reevaluate your strategy.
4. Keep Up-To-Date With Market Developments
Before you invest in any cryptocurrency, make sure to keep up-to-date with its market developments. There are plenty of online news sources and forums where you can find people discussing new coins and whether they’re worth investing in or not. Stay on top of any news stories about cryptocurrencies and don’t forget to factor these into your investment decisions.
5. Use Tools And Resources Such As Social Media
There are so many social media accounts in existence that talk about cryptocurrency; why not use them to your advantage? Most of these accounts focus on one specific cryptocurrency. Since you should be trying to diversify your investments, why not follow different cryptocurrencies via their official social media channels? This will enable you to learn more about all of your options.
6. Market Capitalization
The market capitalization is the value of a cryptocurrency multiplied by its circulating supply. You should not invest in any cryptocurrency with a market capitalization of less than $50 million. This is because such cryptocurrencies can be easily manipulated by traders, thus affecting the price of the coin.
7. The White Paper
The white paper is the most important document of any cryptocurrency. It should contain an explanation of exactly what the project is, what problems it’s trying to solve and how it’s going to do so. If you don’t understand anything in your white paper, move on to the next company!
8. The Team
If you want your investment in a particular cryptocurrency to be successful, you need to pay attention to the team behind it. Find out as much as you can about the team and make sure to do your research. Look into their previous work experience, level of expertise and general reputation within the cryptocurrency community. You should only invest in a crypto project if it’s being developed by a team that has been given praise for its previous work in the industry.
9. Fundamental Analysis
The most common and straightforward way to decide whether a cryptocurrency is a good investment, is to analyse the fundamental factors behind the cryptocurrency. For example, what was the performance of this cryptocurrency over the last few years? Was it price-stable or did it have some spikes in or out of popularity? Is there an established company behind this currency?
10. Technical Analysis
A second option that you can do is to look at technical analysis – things like volume, price movements and so on. You can also look at data such as mining difficulty level, transactions per day and so on. This can help point you in the right direction for which coins might be worth investing in soon.
11. The Technology
Before investing in any cryptocurrency, you need to be confident in the technology. There are over 9000 different cryptocurrencies, each with their own unique purpose. Understanding the technology behind the coin is very important before you invest any of your money.
12. Use Case
Let’s say that you want to invest in a cryptocurrency that is not on this list. Or in other words, a cryptocurrency that brings something new and different to the table.
What is the use case of your investment? What makes it special and why would others want to use it?
You need to know this before investing in any cryptocurrency coin.
13. The Price
When you decide to invest in a coin, you will need to understand if the price is low or high for it. The price of a cryptocurrency is different for every coin, so it is important to work out why the coin may be worth more or less than others. It is important that you buy a coin when it is at its lowest value so that you can make the most profit from it.
14. The Community
The community is responsible for the price of a cryptocurrency. When a cryptocurrency price has gone up a lot, this means that people are looking to buy more of it, which will increase its value further. When you hear about an incredible price rise in a coin, this could be because it is becoming popular and more investors are willing to pay for it.
15. The Future
Investing in cryptocurrency is similar to investing in any other type of currency or share, so you need to make sure that you are confident that the success of your investment will continue long term. You can make money over short periods if you buy low and sell high but the bigger your investment becomes the harder it will be to sell out at any time.