To date, there are already more than a thousand cryptocurrencies in the market and their number will not decrease in the coming years, quite the contrary. It should be borne in mind that cryptocurrencies are intended to simplify the fundraising of small structures, thus leading to the creation of new cryptocurrencies … We can easily guess that we will see more than 10,000 cryptocurrencies in circulation before the end of 2020.
What cryptocurrencies to invest in? What are the criteria to take into account to choose the right purchase of a cryptocurrency? I will try to establish in this post the elements that must be taken into account before investing in a cryptocurrency.
1. What is the project of that cryptocurrency? What is its usefulness?
Behind every cryptocurrency there is a “project.” It is important that the investor is informed about this project before investing. On the official site of each cryptocurrency you can usually find a “white paper”. This document describes the details of the project and its usefulness
2. The capitalization of this cryptocurrency
Whether it is 0.0001 or 1000 Bitcoins, whether it is 0.0001 or 1000 Ethereum, you should not look at the price of a cryptocurrency; Only the capitalization of the cryptocurrency allows the investor to judge whether it is currently undervalued or overvalued.
The investor generally compares the capitalization of a cryptocurrency with the capitalization of cryptocurrencies that have a more or less identical project.
It is important (and often forgotten by investors) not to only consider the number of tokens / securities in circulation. Each cryptocurrency issues a certain number of titles to the market for exchange (trading), but a number of titles are reserved for the development of society, projects, etc … Too much reserve will make the project pass through a SCAM, an insufficient reserve will lead investors to wonder what the usefulness of a fundraiser is …
3. The liquidity of that cryptocurrency
As soon as a new cryptocurrency is listed by an intermediary / broker like Binance or Bittrex, or it’s supported by a trading robots like Bitcoin Digital, it generally registers a rise of more than 50%, simply because it becomes more easily ‘treatable’.
It is important to consider the liquidity of your cryptocurrency. If this does not have much liquidity in the establishment through which it operates cryptocurrencies, do not hesitate to consult the other establishments. Reminder: opening a crypto account takes no more than five minutes. The risk of buying or trading an illiquid cryptocurrency is paying the very expensive spread.
My advice: give preference to cryptocurrencies with sufficient liquidity. Forget the ‘bottom of the ranking’ cryptocurrencies that you will have a hard time trading without paying a high price for it …
4. Your cryptocurrency team and community
A strong project can only be carried out by good teams and a large community of developers. Small cryptocurrencies held by two / three people are very risky. Forget them …