Cryptocurrency: How to determine which coin to invest in
Cryptocurrency has been in existence for a while now but gained popularity in recent years owing to its growth to the popularly renowned coin called Bitcoin.
Let’s take a brief look at the history of cryptocurrency. Cryptocurrency is the amalgamation of two words which are cryptography (from the Greek word Kryptos) and currency.
Cryptography is the science of hiding information or in simpler terms, the study of safe techniques in which only the sender and recipient can understand the context of a message. And we know currency to be a generally accepted means of exchange (money) in a country.
A cryptocurrency is a decentralized form of exchange and technology, that is, no party is in charge of your currency but only you. It’s very different and beneficial in comparison to banks which are centralized institutions and can manipulate your money once at their disposal.
There are tons of crypto coins that are being released and traded on different exchange platforms such as Binance, kucoin, hotbit, and many more. Based on coinmarketcap and as at the time of writing this article, there are over 11,000 coins available and more are being released. The current market capital for cryptocurrency is worth over $2 trillion.
The cryptocurrency is classified into 2 main types which are the main coin popularly known as Bitcoin and the altcoins(alternate coin). Bitcoin is regarded as the bedrock of cryptocurrency since it pioneered the existence of other coins. It came into existence in 2008 by an unknown inventor called Satoshi Nakamoto and performed its first transaction in 2009. It was used at first as a reward for miners but majorly, it’s intended for people to transfer money over the internet with little or no fee.
With time, Bitcoin gained popularity as people used it for basic transactions and when this was noticed, other coins came into existence and also gained relevance with time. The major popular and early altcoins that gained credence, later on, were the ethereum, BNB, DOGE, ADA, LTC, ETC, BCH, XLM, Ripple, EOS, SOL, and many more. It’s noteworthy to know that all these altcoins are therefore dependent on the BTC. For example, an increase in BTC price might steer up the increase in these altcoins and vice versa.
Since we are all familiar with what cryptocurrency is all about, and how it can be used, then how can we profit off it? What are the factors to consider in choosing a good coin for investment?. Let’s get to know that as I highlight those factors that contribute to determining which coin to invest in.
- The first thing to ask is “why cryptocurrency”. Cryptocurrency is a market that involves skill and a basic understanding of how it works. The rudimentary basics of how crypto works, the ever-fluctuating prices, and much more understanding about crypto give us an insight into what we are doing. Many people trade based on the trend of things and lose huge amounts of money. There are diverse investment paths available but why should crypto be your choice? What do you know about it both in technical and fundamental analysis? These are questions you need to ask yourself before you invest.
- Circulating supply of a coin: This is very important before someone can decide to buy a coin. There are various platforms where you can check for a coin’s total supply. An example is the coinmarketcap. The essence of checking this is because it gives a credible value of what the coin is worth. For example, BTC’s total supply is just 21 million coins but its market capital is worth over 800 billion dollars. Due to its limited supply, the value for each coin increases based on the law of supply and demand.
- The coin’s whitepaper: The white paper is information released by a company to give the benefits, plans, how the coin can be used and how the coin can solve different problems. The White paper gives every minute detail about how the coin gains value over time. Any coin without white paper is a failed project already. This is why it’s not advisable to invest in shitcoins because most of them have no whitepaper for their coins.
- The last factor I will talk about is the price history of the coin: The price history of a coin gives a remark if it’s a good coin or not. If a coin hasn’t made any tremendous improvement or increment in the past, there’s little to no way to know if it will do better later on. The trading market is constantly forming highs and lows. So to buy the dip (low) of a good coin shows that there’s a propensity for increase it has done previously and hope it will do again. So price history is a good way to know more about your coin and to make a healthy decision about it.
A combination of all these aforementioned factors places you at a better advantage of making a good fortune out of your cryptocurrency investment. Nonetheless, as I said, the cryptocurrency market is always fluctuating and any major effect on bitcoin affects the altcoins. So it’s good to be cautious while trading.
To cap it all, buy your coin based on merits and proper evaluation.
