5 Things to Consider Before Buying Cryptocurrency.
For almost a decade the crypto markets has been in a bear trend,the interest in crypto is still increasing rapidly.Investments in cryptocurrencies will only grow as the market stabilizes.
When it comes to digital assets like cryptocurrencies, it’s important to stick to a strict strategy and concentrate on learning about the key drivers of a coin’s value.
Unlike the stock market, the ‘crypto world’ is very different.Many experienced investors are familiar with standard metrics such as the price-to-earnings ratio, debt-to-equity ratio, and beta.However, in the ‘crypto world’, these types of metrics do not exist.
So, what factors do crypto traders consider when making an investment decision? Here is a list of the top 5;
- UNDERSTAND THE BASICS.
First, learn everything there is to know about the blockchain. Every crypto project’s framework is focused on this technology.
Look for a good cryptocurrency guide after you’ve found out how the blockchain functions. A quick Google search can yield a variety of useful details.
*The Type Of Token.
Is this a utility token or a security token? There is a major distinction between the two. Is the coin mined using a Proof-of-Work or Proof-of-Stake? this is an important area to consider .
After learning how the Blockchain works and the functions if the cryptocurrency,it’s time to consider the investment requirements.
2.THE BUSINESS PROPOSITION.
Just like any other good business satisfies needs and solves problems, the same goes for crypto projects.Do they solve any problems?
Before choosing a long-term investment, consider the project’s team, their goal, their strategy to achieve the mission, and their overall enthusiasm.This is also an excellent time to consider the purpose of the cryptocurrency they’re selling.
Investors can avoid succumbing to speculation or “fomo”(Fear Of Missing Out) if they consider the project’s business proposition.
3.TOTAL AND CIRCULATING SUPPLY.
The total supply of a coin is the maximum number of coins that can be mined or entered in the market, while the circulating supply is the number of coins currently in circulation. There is general a variation between the two figures since most coins are mined or a proportion of them is owned by the creators.
When determining the worth of a crypto project, these figures are crucial. The production of coins has a significant impact on the price of the coin due to the fundamental theory of supply and demand. As an example,the current value metrics of bitcoin is
.Price-$58,300.5
.Total supply-21 million coins
.Market cap- 600 billions
The fact that the total supply of bitcoin is only 21 million coins is one of the factors that moves the value up (the lower the supply the higher the demand).
4. PRICE HISTORY.
Cryptocurrencies are really volatile. This is caused by speculation, rumors, pump-and-dump schemes, and the lack of regulatory oversight are all to blame. The price history of a coin tells a story
most of the times,less expensive coins are more exposed to pump and dump schemes.Understanding this is very vital as an investor can abate unnecessary losses.
The price of a coin can be linked to the price of other coins, stock market movements, or world events. When Bitcoin’s price rises exponentially, for example, most altcoins fall in value. This is attributable to the fact that Bitcoin is the most commonly used cryptocurrency for exchanging other cryptocurrencies. An rise in Bitcoin transactions results in an increase in altcoin sales. This raises the price of Bitcoin thus lowering the price of altcoins.
Another critical consideration is the amount of exchanges on which the coin is currently exchanged. Is the coin traded on most common exchanges or only a few smaller ones? Coins being introduced to major trading platforms like Binance can have a huge impact on the price.
Understanding why a coin’s price rises and falls, much like stocks, is crucial to deciding its long-term value.
5.DEVELOPER /COMMUNITY ACTIVITY.
Solid projects have intense developer activities. If the activity is low or poor, then that should be a cause for concern.One of the of the easiest ways to measure this is by checking the progress of the project on Github
All task performed on GitHub is open to the public, as are the project’s activity metrics. The number of updates it has got, the number of watchers it has, the number of forks it has made, and the total stars are all useful indicators of the project’s activity.
COMMUNITY ACTIVITY.
A strong community is just as good as the ,high developer activity of a project.The more or larger the activity of a community,the more valuable the coin will get.
Checking out the coin’s Twitter page is one of the best ways to get a sense of how big the group is. How many people have joined the project? What is the current level of operation in the account?
Another good place to look is Reddit. Reddit has become the go-to place for cryptocurrency news, announcements, and general discussion. Is there a lot of debate about the project on Reddit? Is it true?
