How to choose coins for investment and trading
There are different strategies for investing in the crypto currency – someone invests only in bitcoin, someone else is on the air. Others make up a portfolio of top-10 or top-25 coins. Still others break the portfolio into reliable and risky investments. Etc. In general, there are many strategies. But it’s not a fact that every investor understands what the essence of this or that koin is and what are his prospects for growth. What is written on the official website or Whitepaper of the project – does not always reflect the objective picture. And all the actual statistics are on popular resources such as cryptocompare.com or coinmarketcap.com. In today’s material, we have prepared for you an explanation of what figures from these tables mean, and what should be paid attention to when choosing a crypto currency before choosing it.
The criteria for investment and trader coins are somewhat different. First, we analyze the indicators that are important for both active trading and passive storage.
Definitely the most important indicator determining the faith of investors, traders, users in the value and prospects of this crypto currency. The coins of the top ten are large and small companies, powerful miner pools, teams and developer communities, and finally thousands or even millions of users who recognize the value of these coins.
Their course may decline from time to time, but thanks to a solid foundation, the probability of falling to zero is scanty. Finally, such crypto-currencies largely follow the market, and if it grows, their price will also go up, even if there is not much progress in their own ecosystem.
But for coins with a capitalization of less than a billion it makes sense to watch when it was formed. If for a relatively long time – the currency is reliable, if it soared in the next 2-3 days (the growth of inexpensive coins at 200-300% per day is not uncommon), it is worth to be cautious – it can also easily fall.
Representation on stock exchanges
The second important indicator determining the popularity and relevance on the exchanges. Watch is primarily Top-10 exchanges on CoinMarketCap, if the coin is at least a pair of tops from the tops – it can be trusted, it can be traded. Now the first number is Binance, but on dynamic kriptornke everything changes quickly, and tomorrow another leader may appear.
Ideally, the crypto currency should be traded at all, but now there are only 4 coins. The absence of a coin on a part of large exchanges is in some sense a plus when they add it, the rate will rise.
Another indicator that determines the demand, prospects, popularity of the currency for traders. The higher it is, the more active the coin goes, and therefore your buying and selling opportunities are much greater. If the indicator is low, it seems that at the moment this coin is not needed by anyone and nobody uses it.
Number of coins
Exclusive goods cost more, and this principle is true for everything, including the crypto currency. The fewer units are planned for issue, the more expensive each can become individually in the future. Developers of some koins specially lay in their projects the opportunity to burn some coins with time, thereby increasing the value of the remaining ones.
The price of a coin
In a certain sense, this indicator is related to the previous one – the larger the total number of coins, the lower the price of each separately, but also has an independent value.
«In crypto-currencies, which are inexpensive, the prospect of growth is higher (a coin of $ 1 to grow to two is much simpler and faster than a coin for 1000 to rise to 2000).»
Among other factors of attractiveness, it should be noted that inexpensive coins often represent young developing projects, and as they grow, the rate will inevitably rise. Finally, there is also an irrational psychological factor – to be the owner of several dozens of inexpensive, but full-fledged cryptonyms internally more comfortable than the owner of a small part of an expensive koin.
The next two items are significant mainly for trading.
A very important factor for a trader, since it is the course changes that allow him to earn. A coin with a high capitalization and all other indicators, but a weakly and monotonously changing course will be a good choice for a long-term investment, but for a trader it is almost useless. But when the rate is similar to a peak or a sinusoid, changing by 10-20% each day – then the Crypto currency will provide huge opportunities for earning, you just need to choose the right entry and exit points.
Accounting for this factor will allow you in the long term to remain in the black, even if individual forecasts are not justified. Assuming the coin’s growth in the near future to some level, compare it with how much it can fall. As a point, take the minimum rate for the last 6 months (or a year, if you are very careful). The higher the ratio of possible profits to losses, the better.
For investors who do not plan to earn money on daily, weekly, monthly fluctuations of the exchange rate, but think to buy for a long time (from six months and above), in principle all of the above criteria (except for volatility), but there are additional requirements.
As a rule, even before the launch of the coin, its creators spread the concept on one or several thematic forums (the most famous and visited is BitcoinTalk). If the idea is like, if people want to use this crypto currency, then it is actively discussed. About it, sites are created, groups in social networks, about it they write in blogs, etc. If the coin is not interesting to anyone – its prospects are more than doubtful.
Presence of large companies for the project
Bitcoin was created by a single person – Satoshi Nakamoto, and many projects after him were also created by individual enthusiasts or teams of programmers. But now there is enough and crypto-currencies, launched by large enough companies.
Such coins have the obvious advantage that they rely on a strong foundation, have good information and financial support, are finally sharpened to a specific business niche, and in the case of a qualified team of executors the probability of success is great.
However, we should not forget that such crypto-currencies are connected with the parent company, and in case of failure in the main business, the company’s financial problems will inevitably draw a coin to the bottom.
An important component for any information product, and digital currency is no exception. On the positive news, the rate can grow substantially, while the negative ones can drive the unlucky investors and traders into big losses. Finally, the very presence of news means that the project is active, functioning, developing, and therefore there is a prospect for further growth of the exchange rate.
Finally, the most important factors in terms of choosing a crypto-currency for long-term investments are the technologies, approaches, advantages over competitors or ways to level out the shortcomings of already existing solutions. After all, the now leading bitcoin and ether are not ideal blockhouses, experiencing various kinds of difficulties lately.
Investing in the crypto currency and trading on the exchanges can bring a good income, but even in the most promising market mistakes lead to financial losses, or, at least, delay the achievement of success. In order not to waste time, you need to know how to choose coins for investment and trading. On regular open online master classes Cryptobotany you can find out which portfolio we collected and what income we get from it. Join now.