It’s a win-win situation for cryptocurrencies. But at the same time, investing in cryptocurrencies is a hazardous affair. Does it mean not to invest in them? Nope. not at all. You just need to find the right fit for you.
Cannot stop talking about Bitcoin before we hop onto any other cryptocurrencies. Bitcoin is the real twinkle. It has an enormous market out there. So, what about other cryptocurrencies?
Yes, there is a bigger space for other cryptocurrencies. They could be the next Bitcoin or probably be the modern innovations bigger than Bitcoin. Ethereum (ETH), Litecoin, Bitcoin Cash, Dash Ripple are the others that are around us. Well, other coins promise to send us to the moon. Well, how do we come back? The biggest question!
So, like the diversification in the stock or mutual funds, how should you create a crypto-index to diversity? Here you go – we have got the parameters covered for you.
Total Supply and Circulation of the Coins Matters
It is essential to look at the market capitalization and total circulation of the coin. So the total supply of the coin signifies the maximum number of coins that can enter the market, and its circulation means the total number of coins available in the market. So, to evaluate any crypto project, one should consider the total supply and circulation of the coin. If the coin has an unlimited supply, then based on the demand and supply theory, if anything that is not scarce may not command a reasonable price.
Well, you must be aware about the supply limit of Bitcoin is 21 million.
The Price Fluctuations
Just keep an eye on the price movement of the coin. The price fluctuations of any coin have a story to tell. For instance, look at Dogecoin. It was created as a joke and a meme coin. But then, one single tweet of Elon Musk took it to the moon. Its price really got so high that none expected it to be.
But remember, how long does it go? Would it be fine to invest in such coins? Well, if you are up to face any risk by investing in a meme coin, then go for it. Better, do not invest in a coin based on the trends or due to the influences, instead, think wisely. Go for the right one.
The people behind crypto are the most critical factor to go for any coin. They are authentic and responsible for the coin’s role in the market. The success of any company depends on the leadership team. Hence, you need to understand and analyze the vision of the people behind the platform. You should check on the founders’ experience and know whether they invested in their own coins or the project.
‘We’ the Community
These days, a coin’s success can be attributed to its followers. They are strong supporters who could build faith and interest in the coin. So, visit the coin on the internet, check ou videos, its social media presence, find out the demand and go, tag, tweet, and get all your questions or queries answered by fellow community members. They can give you a bigger picture and help you understand the value of it.
If there’s something that is in written records for the coin, it’s the whitepaper. All ICOs or the Initial Coin Offerings have whitepapers that define the coin’s purpose, technology, and work procedure. This will help you understand the vision of the company. Studying a whitepaper could be the primary evaluation of the coin before taking any chance. This will increase the chances of knowing the potential of the coin and its grey area. All that we spoke about above will be available in the whitepaper. So give it a shot!
Technology is Key
The underlying technology is the crucial factor. It helps in understanding the power and the cutting edge functionality of the coin. For example, Ethereum has many use cases, such as its smart contracts utilized in the banking and financial sector. One can predict the markets, replace escrows, embrace transactions, and so on. So Ethereum, apart from being a cryptocurrency, could be a lot more to several sectors,
So the technology that could solve the real problem and bring in real solutions is the go-to one.
Well, it’s time to learn some tokenomics, nothing but Token Economics. It defines the cryptocurrency functionality and work procedure, and overall ecosystem. The tokenomics explains how the tokens will be distributed and used, their value, and their utility factors.
Investing in cryptocurrencies is both risky and highly profitable. It depends on which one you choose and how you analyze it!