If you are trying to decide which cryptocurrency to invest in, you need to understand that the fundamentals are everything. Selecting cryptocurrency investments might be simple if you first conduct some preliminary research.
Therefore, we will go through some simple techniques to choose which cryptocurrency to invest in this post.
Why Do You Need Solid Principles?
Most people are unaware of the basics of investing because there are so many newcomers in the cryptocurrency industry. They merely hear that a coin is nice, purchase it, and cross their fingers in the hopes that it will “moon” soon.
However, make no mistake—that’s a poor way to go about it!
Make sure you understand why you are investing in a cryptocurrency before doing so; otherwise, you run a very high risk.
Here are 10 methods for selecting a bitcoin investment.
The Community
Look for cryptocurrencies with robust communities and devoted followers since that demonstrates individuals have a real interest and belief in the coin. A cryptocurrency’s following has a small role in its success.
Check out a few YouTube channels, some Reddit subreddits, and some of the community comments to see what others are saying about your potential investment.
Going to forums and looking at the Reddit community is a great way to start understanding the hype surrounding an altcoin and whether you should invest if you’re unclear about the currency.
Additionally, some of the more complex and technical ideas are frequently deconstructed and well explained in these communities on Reddit.
Reddit communities for larger cryptocurrency groups are typically quite active, but even smaller communities are very helpful and typically happy to answer any queries.
So, their community is a terrific place to start if you need assistance understanding how the procedure works, the technology, etc.
Fundamental Analysis
Fundamental analysis is simply the supporting factors of an investment—their team, their goals, their abilities, etc. Don’t worry about the technical details if you’re new to cryptocurrency.
Fundamental analysis will ultimately be just as beneficial to you as technical analysis.
Therefore, knowing how to perform basic analysis will enable you to make wiser investing choices. In addition, fundamental analysis enables you to distinguish between wheat and chaff in a market where many participants are vying for low-quality altcoins.
The Team
One of the top things you can analyze is the team behind the crypto project. In fact, researching and vetting the team behind a crypto project or company is one of the most important factors you can look into.
Here are a few things to examine:
- Who is behind the cryptocurrency project?
- Do you trust their expertise?
- Is the team behind the project ambitious?
- Does the team have a proven track record of success?
These are all crucial things to consider when choosing which cryptocurrency to invest in because a team may make or break a project.
The Technology
The underlying technology of a cryptocurrency plays a significant role in its success; you need to know how it will fare in comparison to its rivals and what makes it unique. Watch out for the major disruptors—the coins that will utterly alter their sector.
Let’s take Ethereum, for example. Currently, Ethereum is one of the best cryptocurrencies in terms of technology because:
- Smart contracts: This type of technology makes the trade of anything of value easier.
- The technology behind Ethereum is built to make it simple for programmers to incorporate the blockchain into their own apps.
- Ethereum Virtual Machine technology (EVM): This technology makes it simpler for developers to produce more complex applications.
Due to its cutting-edge technology, Ethereum is rapidly growing to be one of the most popular cryptocurrencies worldwide.
The White Paper
Every time a new cryptocurrency is launched, a white paper is also typically published. This will describe the coin’s function, technology, operational principles, and overarching vision (I’ll get to that later).
One of the finest locations to assess a coin’s fundamentals is in its white paper, so you should never invest in it until you’ve read it.
The white paper may contain some technical terminology, but don’t let that turn you off. It’s such a great source of knowledge that it’s worth reading.
Additionally, the more white papers you study, the more adept you will be at picking long-term winners.
The professionalism and legitimacy of a cryptocurrency may also be determined by reading the white paper; here are some warning signs to look out for:
- Are the promises made by cryptocurrencies unrealistic?
- Is the white paper’s list of overall goals ambitious?
- Are there any grammatical errors? This is a major warning sign if there are several! A corporation is probably not serious about its future if it can’t take the time to write a quality white paper.
Their Vision
Future cryptocurrency development is crucial. If they aren’t planning for the long term, you should be really concerned since you want to be sure that this coin will be around for at least the next five to ten years.
A big vision is a sign of ambition
Try to determine the company’s intentions for the coin’s future from its white paper, social media posts, or website, and look at the community to see what kind of culture is being developed.
Only invest in cryptocurrencies that have a clear long-term vision and the potential to succeed. Even if short-term gains can be thrilling and you may be considering swing trading, you should still consider where cryptocurrencies will be in 5, 10, 20, etc.
Their Leadership
The leadership group steers a coin toward success; they are the ones who make all the important choices!
The leaders are responsible for carrying out the vision, so learn more about their group and what they have accomplished thus far.
Pricing History
Have you ever heard the adage, “Past conduct is the best predictor of future behavior”?
Of course, with cryptocurrencies, this isn’t always the case. However, price changes show you the coin’s history and whether it will be a good investment in the future.
- Do they fluctuate in value?
- Was the currency able to withstand the market’s significant decline, which it frequently experiences?
- Do they have the highest price ever? I would advise waiting it out till the cryptocurrencies experience a decline if they have reached an all-time high.
You might be unfamiliar with the idea of understanding a cryptocurrency’s pricing history. The majority of people are blind to what they are looking at!
While examining the current price is one thing, some people prefer to attempt price forecasting.
It is a game of chance to try to predict how the price will vary for anything that is traded on an exchange. Nobody is going to always be correct.
Therefore, if you’re just starting, I wouldn’t worry about forecasting the price in the future; instead, focus on the fundamentals.
Credibility & Reputation
Is there respect for cryptocurrency online? Do they have good standing? In the end, if they have a negative reputation, you know you shouldn’t invest your money in them. To succeed in this industry, you really need to have high credibility and trust.
Therefore, search for the coin or the token online and in online crypto communities to see what people are saying about it.
The third factor in this situation is that you should invest in a coin that people are enthusiastic about. Scams must be avoided!
