Cryptocurrency is doing the same to money as what the internet did to information. Digital currency is undoubtedly the future of payments and transactions. FOMO(Fear of missing out) is making people try their hands into the crypto world.
The cryptocurrency market is highly volatile. And it is a major concern among investors. Also, differing beliefs of governments having no regulating authority adds to the growing concerns of investors. You need to be careful with what cryptocurrency you invest in. Before you make any move any investment in any cryptocurrency, you should consider the following things:
#### 1. Reading the white paper to understand different aspects of the project
Every successful business aims to solve problems. Cryptocurrencies are no exception! Cryptocurrencies are bringing a revolution! But every cryptocurrency is working on different problems. Once you get an idea about the aim of the project, you’ll have faith in the project and will ensure you aren’t betting your money on a hit-or-miss cryptocurrency.
A crypto white paper is created by the founders/developers to help them sell the crypto. The white paper provides facts, diagrams, statistics, and quotes, rather than focusing on pushing the emotional button. The white paper lays stress on technical aspects. Even if you aren’t much into technology, you’ll still get meaningful insights out of it.
#### 2. Total and circulating supply
Whose prices do you expect to be higher - the one with limited supply or the unlimited supply? Of course the one with limited supply. Bitcoin is the biggest example of a cryptocurrency with a limited supply. There can be no more than 21 million Bitcoin. No more coins can be mined once it touches the 21 million mark.
The problem with unlimited supply is that whenever new coins enter the system, they dilute your stake. Take the example of Dogecoin, every day 14.4 million Dogecoin enter the system. The current circulating supply stands at nearly 130 billion. With new Dogecoin entering the system daily, the demand for new Doge should keep up with the pace of supply, else the prices would fall!
#### 3. Price history
Buy the dip, not at the point of take-off! The crypto market is very volatile. A few days back, we saw the prices of the cryptocurrency market down by almost 40% in a day. Though the dip was short-lived!
Prices of some of the cryptocurrencies are driven by the hype around them. While another factor that drives the prices of cryptocurrencies is the action taken by governments of bigger and powerful nations regarding cryptocurrencies.
If like me, you too are new to investing, always invest your money when there is a dip in price and not when you see soaring prices. The fall is quicker than the rise. You can use the previous price trends to have an idea at what price you should consider investing. Believe me, you don’t want to invest your money while the prices have shot up! I refrain from buying at an all-time high!
#### 4. Constantly keep in touch with the developments
The cryptocurrency projects are open-source and can be found on GitHub easily. You can view the development activity on GitHub. If the developments are stagnant it might be a cause of concern. But if the developments are fast-paced, the project might just be a good investment.
#### 5. Track engagement on Community
You should consider checking the crypto communities on Reddit and Twitter. There you’ll find people who are in awe of the crypto. Reddit and Twitter are the best places if you want to be updated about developments around the cryptocurrency.
The engagement on the community pages gives an idea about the popularity of the cryptocurrency. And what lies in the future for the cryptocurrency.
#### Final Thoughts
Invest in crypto projects that you think have the potential to grow and can help solve major problems. A major reason that the crypto prices fall is because of the lost faith.
Bitcoin went up, touched new highs when Tesla declared they would start accepting payments in Bitcoin. Just because people saw its utility. They found it valuable. But the moment, Elon Musk tweeted about the environmental impact of mining, and stopped accepting payments through Bitcoin, all the gains vanished just because they lost faith in the project.
Posted Using LeoFinance Beta