Cryptocurrency is one of the fastest-growing industries in the world, and it seems like everyone wants to get in on it. This can be overwhelming for those new to cryptocurrency and blockchain technology. Fortunately, there are many ways to invest in cryptocurrencies and tokens without buying into every single one or reading a hundred different whitepapers to find out how much money you would be spending. Here are a few things to consider before you invest in a cryptocurrency:
Crypto Indicators
If you’re selecting a token for investment, it’s essential to use crypto indicators to compare the different options. Cryptocurrency indicators are an excellent tool for evaluating the quality of a given cryptocurrency or token. Indicators are algorithmic tools that help you make smarter investment decisions. They are free, easy to use, and will help you determine whether or not a particular cryptocurrency is worth investing in. Crypto indicators can also help you identify the best time to buy, sell or hold a specific currency. Exchange apps like the FTX app offer access to chart pattern tools and other indicators that you can apply to the cryptocurrency of your choice.
Whitepaper
A white paper is a document that outlines the goals, challenges, and solutions of a cryptocurrency project. It’s a good idea to thoroughly read one before you invest in any crypto token because it will give you insight into all of the critical aspects of their platform.
Tokenomics refers to the economics behind blockchain technology and tokens. This includes token distribution (how many tokens are issued), inflation rate (how new tokens are created), and how funds are allocated within the network. All of these characteristics of a token are important to understand and can offer insight into the sustainability of that particular coin.
Reading whitepapers can seem daunting at first, but once you get past the initial jargon, it becomes much easier to understand what’s going on under the hood of each project’s ecosystem.
Availability on Exchanges
When choosing a coin to invest in, an important consideration is whether or not the token is listed on reputable exchanges. Exchanges are an excellent way for investors and traders to acquire new tokens, but many factors can impact the security and liquidity of an exchange.
There is no such thing as a perfect exchange since every platform comes with its own set of pros and cons. However, some features you should keep in mind include the following:
- Security: How secure is your personal information? What are their security measures (if any)? Are they running at total capacity? Are there any known breaches or hacks?
- Liquidity: Can you easily purchase/sell tokens at market prices? If not, how long will it take for the order to complete? Are there any fees associated with trading on this platform?
Choose an exchange like FTX with low fees and access to over 300 cryptocurrencies for traders to choose from so you can trade everything from ETH USD to DOGE USD. FTX also offers crypto trading options and futures for advanced traders.
Trading Volume
The trading volume of a crypto token is a good indicator of its popularity and potential for growth. A high trading volume means that many people have bought into the token, which may mean it will increase in value. Conversely, if there are few buyers for the crypto token, it’s likely to decrease in value over time.
The trading volume should be monitored and tracked so that when there is an increase or decrease in popularity, you can decide whether this is important enough to warrant selling your coins or buying more.
Stakeholder Community
Another critical factor to consider is the community around the token. The more people vested in a project, the better it will perform. To get an idea of how many people believe in a particular crypto token, you need to look at its market cap and trading volume. These two metrics show how many people have bought into the project and are willing to hold on for long-term gains. You can also join online crypto communities to better understand the sentiments of the community surrounding the token. Are other coin holders optimistic about the future of the token?
If there aren’t enough stakeholders, it can lead to liquidity issues. If there are too many stakeholders, however, there might not be enough room for growth for everyone involved with your investment.
There are thousands of cryptocurrencies to choose from when investing. However, there are important considerations you can use to differentiate a promising crypto project from bad investments. Consider these factors and start researching the coins that interest you most.