5 notes when investing in cryptocurrencies

BlogJanuary 14, 2022

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Recently, the cryptocurrency market has become bustling. Interest in this market is increasing day by day. Investors are always looking for opportunities and many have succeeded. However, not everyone is lucky enough to win. But regardless of whether the cause is objective or subjective, before investing in this market, investors should clearly understand the information related to cryptocurrencies and take it to heart 5 notes when investing in cryptocurrencies are mentioned in this article.

5 notes when investing in cryptocurrencies

Do you know what cryptocurrency is?

What is electronic money? Probably a question that not every investor can answer or explain clearly. The majority of cryptocurrency investors have little interest in the technologies involved in it. They simply invest according to the rush of the market when the price is high, so sometimes not knowing enough leads to losses. So before you want to invest in cryptocurrencies, it is most important for everyone to understand what they are planning to invest.

You learn the basics like learning about Blockchain, which is the basic technology involved in cryptocurrency projects. After you have a good understanding of Blockchain. You will have a better understanding of the market and more confidence to invest in cryptocurrencies.

Let’s learn about what Coin is and what is the difference between PoW and PoS, these are important factors to consider. Once you understand the basics of Blockchain and the function of cryptocurrencies, it is also time to consider investment criteria.

Many people are not well informed and think cryptocurrencies and stocks are the same. But, actually, the two are different, and most long-time investors know how to evaluate a stock based on specific criteria like price ratio, beta, debt-to-equity. However, these types of indicators do not exist in the cryptocurrency market.

Therefore, investors need to carefully consider the following 5 notes before investing in the cryptocurrency market.

5 notes when investing in cryptocurrencies

1. How has the price history changed?

The prices of cryptocurrencies are often very volatile and influenced by the market. The cause can be many people speculating, exaggerating prices, dumping, or not having regulatory oversight.

Investors should be aware that cryptocurrencies with a low market cap are particularly vulnerable to dumping schemes that, if avoided, will not incur losses.

The price of a coin can also be correlated with the price of another coin compared to virtual currency market fluctuations or influences from world economic events. Specifically, if the price of Bitcoin increases rapidly, most Altcoins will decrease in price, so Bitcoin is considered the main currency used to trade other altcoins. If the demand to buy Bitcoin increases leading to an increase in the selling of altcoins, it means an increase in the price of Bitcoin and a decrease in the price of Altcoins.

Also, another important factor to keep in mind is the number of exchanges where the coin is currently traded. Whether this coin is on a large or small exchange will significantly affect the price.

So cryptocurrencies are like stocks if you understand why a coin is rising or falling in price there is a long-term investment in its value.

2. Aggregate supply and circulation

The total supply of a coin is representative of the maximum amount of coins that can be mined or enter the market. While circulating supply represents the current amount of coins in the market.

These are extremely important metrics used to evaluate the value of a cryptocurrency project because the basic principle of supply and demand, the amount of money supply has a great influence on the price of the coin. Currently, the total supply of Bitcoin is only 21 million coins and this is also the main factor driving its price up. Understandably, supply is rarely high in demand, which is also a factor affecting the price of cryptocurrencies.

3. Business plan

Cryptocurrency projects, like the projects of other companies or businesses, have to solve outstanding problems and find new directions for development. Especially for startups, cryptocurrencies also need to solve a certain problem.

If it is a long-term investment, the most important thing is to properly evaluate the mission, the project completion plan, and the level of achievement. Should focus on those who have potential customers, have real value, and stay away from those with unknown information.

It is also a good condition to consider the functions of the cryptocurrency they are selling as a token worth investing in. This means that whoever owns the coin also owns a part of the company in the same way as shares.

Consider whether this is a utility token and whether these tokens are redeemable for services on the blockchain. Therefore, reviewing the business proposals of the projects will help investors not be shaken by the inflated recommendations.

4. How does the developer work?

Projects with strong capital have the participation of reputable and experienced developers. If you are knowledgeable about coding and technology, you can simply go to GitHub to learn about projects that interest you.

All work done on GitHub is public, including project performance metrics. Specifically, the number of updates the project has developed, how many followers, how many sub-branches have been created, the total number of main stars, etc. These are all metrics used to measure the activity. of a prestigious project.

Issues identified and bugs being fixed, are there many people involved in the project. These are indicators of whether developer activity has increased and are an indication of how strong a project is.

5. How does the community work?

When investing in cryptocurrencies you should know that a project with a strong community is just as important as the activity of the developers. The larger the community and the more participants, the higher the coin value.

The easiest way to gauge the community size of a project is to check out the Twitter page and Telegram channels to see how many followers the project has and what activity is going on. From there, it will evaluate the reputation of the project to decide to participate.

Concluding

Cryptocurrency is a relatively new field with a rapid development speed, so it creates many opportunities as well as many challenges for investors. You need time to evaluate and invest properly.

Please note the 5 things the article has just shared above to make a profit when investing.

We hope that the above information will help crypto investors effectively and gain a lot of profit.

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