With the crypto market showing significant recovery this year, many people are taking an interest in cryptocurrencies. Every day, new investors are stepping into the market. If you are also looking to invest in cryptocurrencies, there are a few things you need to make sure beforehand. You might have found yourself wondering many times about which cryptocurrency you should invest in or how to purchase a cryptocurrency. All the confusion lies here only, and if you do not research thoroughly about the crypto asset you are going to invest in, you could risk losing all your investment. You need to follow a strict strategy and understand various measures of a coin’s value.
In this article, we are going to provide you with key tips that would not only help you with choosing the most reliable cryptocurrency but getting the most out of it.
Is Crypto Similar To Stocks?
Cryptocurrencies are often equated to stocks, even though they are really different from each other. You might know all about stocks and bonds such as the standards metrics including debt to equity ratio, price to earnings but these things don’t exist in crypto. In simple words, cryptocurrency is a completely different animal and if you are looking to invest in it, given below are the things you need to know.
Learn Everything Possible About Cryptocurrency Investment
It is crucial to have a good understanding of what you are investing in before you start your investment. Many people make this mistake and start investing in cryptocurrencies without having knowledge of the same. There is no way you are going to be benefitted with the investment if you don’t even know about the technology behind it.
- Start by understanding the underlying technology behind cryptocurrencies, i.e. blockchain and then head to cryptocurrency.
- You can find many guides regarding cryptocurrency on Google but make sure you rely on a trustworthy source or website for that.
- One more important thing that you need to understand is if the coin you are going to invest in is a security token or utility token. You need to be aware of the clear difference between the two. Dig deep into the web and find everything you can regarding the top.
Once, you are done with all your research about blockchain and cryptocurrencies; you can get started with the investment criteria given below in this article.
What To Do Before Investing In Cryptocurrencies 2020
1. Project Strategy
If you want to invest in crypto for the long term, the first most thing you need to look for is the reliability of the coin. The following can be predicted by evaluating the team involved in the project as well as the strategies they are relying on to accomplish their mission. If you have doubts for a particular project or about their founders, it’s better to stay away from it.
2. Security Token Or Utility Token?
Once you are done researching the project, the next thing you need to look at is the functionality of the coin. Know if the coin is a security token or a utility token. It is always better to invest in the security token as it provides you with the ability to contribute to the decision made in the company.
3. Total Supply and Market Capitalization
Secondly, what you need to do is evaluate the coin’s total supply and the project’s market capitalization. This information will help you know the value of the project. The supply of coins plays an essential role in the price of a coin, given the basic principle of supply and demand.
For instance, if you’ll look for the current value metrics of Ripple, you’ll find out that the total supply of the coin is around 100 billion with a market cap of $10.6 billion.
According to some of the investors, the high supply of Ripple is limiting its value. And when you compare these altcoins with the total supply of Bitcoin, you’ll find a huge difference as it is only 21 million. Some argue that the lower supply of Bitcoin is the reason for behind its higher demand.
3. Price Records
Don’t forget to check the price history of the coin you are interested in before you start investing in it. Just like bonds and stock, knowing why a coin’s price increase or declines help in evaluating its long term value in the market. The price history tells the whole story behind the coin.
The value of coin also represents its connection to stock market moves and the prices of other currencies. For example, you will notice that whenever the Bitcoin Price soars, there’s relatively a decrease in the price of altcoins. This might be because as the leading cryptocurrency and the primary coin, mostly Bitcoin is used for trading other altcoins. With the increase in the purchase of Bitcoin increases the selling of other coins, which leads to a rise in the value of Bitcoin and a decline in the value of altcoins.
4. Beware Of Frauds
The value of cryptocurrencies keeps on fluctuating, which represent its volatile nature which is due to hypes, speculations, and even the pump and dump schemes. If you are going to invest in cryptocurrencies, these are some things you need to be aware of.
Mostly, the coins with low market caps use tactics such as displaying the fake coin value or making false promises to the investors to sell their stocks at a higher price. Be aware of such schemes to avoid losses.
5. Other Important Factors
Moving towards the next step, you need to check for the number of exchanges that are trading the coin. Find out if the crypto asset is available on most of the cryptocurrencies or just some “not so famous” exchanges.
These were the key factors you need to check out before stepping into the crypto industry. Besides these, there are a few more factors that can help you evaluate the reliability of a crypto coin on a higher level that includes the coin’s community, developer activity etc. If the community of the coin is larger, it represents the higher demand of it. A decline in the developer activity of a project is a cause of concerns.
How To Purchase Cryptocurrency In 2020?
So many of you wonder how to purchase cryptocurrency in 2020? Will it be simple to invest or a difficult cumbersome process?
Purchasing and investing in cryptocurrencies in 2020 is not a difficult process at all. If you are a beginner, just open your browser and search for the best crypto exchanges to initiate the buying of coins (Ex. Binance, Coinbase, Bitfinex, Huobi, Kraken etc) or you can scroll to the best-decentralised exchanges like Changelly, ChangeNow, Swapy etc. Read the guidelines carefully, check for the authenticity (Though mentioned names have no trust issues!), check for the updated features and just take a deep breath. Create your account on the platform suited you most and link your bank account, after completing the verification process. You are ready to purchase cryptocurrency! Just add the number of coins you wanted to buy and add your payment method (which can be a debit card, credit card, Paypal or even bank transfers). Click on the “Buy Now” option. Hurray!! Your first purchase is done. Don’t forget to check the portfolio section to cross verify the transaction done. We hope, now you came to know how to purchase cryptocurrency!
Finding which cryptocurrency to invest in 2020 or purchase is a time-consuming process that needs a lot of research to be done beforehand. You can’t just go and invest in any coin in the market, as it needs proper research to understand the working of the project as well as the underlying technologies. Once, you’ll get familiar with all these key factors mentioned above and select the reliable crypto coin for investing; you can move on to next step, i.e. find out the exchange in which you want to trade and a crypto wallet where you want to store your cryptocurrencies.