Crypto can often be seen as the wild west of the trading and investment world. Anything and everything goes while the whole world bends, moulds, and figures this technology called blockchain out.
So how do you sift through the dirt to find the nuggets of gold?
The very first nugget of advice I can give you is Slow Down. It's very easy in the ever-changing fast-paced world of crypto to get sucked into FOMO and make impulsive decisions. However, Impulse usually comes second to patience.
When it comes to investing my heard earned cash I always follow the following list of questions.
What is the coins current market cap?
The market cap is the total value of the coin's economy. This value is found by multiplying the total coins in circulation (How many coins have been mined) by the current coin price. This is not a meaningful number on it's own, but is a great way to benchmark a coin against others, as well as seeing what a project is worth at the end of the day.
Is the coin featured on any exchanges?
I should hope you're only looking to buy a coin that has managed to get onto an exchange. The other thing to look out for with this topic is what quality of exchange the coin is on, and what the liquidity looks like .There isn't much point in a coin which doesn't have any movement on the exchange. Crypto's are currencies after all, and a healthy currency is liquid.
What does their community look like?
Most coins will have some form of community. Discord, Telegram, Reddit, and Bitcointalk are just a few examples of viable platforms to host their communities. All of these options are very well used, but the quality of the coin's community within each of these platforms can tell a great deal about the quality of the project as a whole. You're looking for channels where community users are reaching out for help, and actually being helped. You're looking for suggestions from the team, or even just involvement from the developers in building an environment which welcomes feedback. These things show us that the team behind the project are interested in the greater good of the project as a whole.
What does an unbiased review say?
There are so many coins which pay people to leave good reviews on each of their public platforms, so finding an independent and realistic review can be tough. In this case, you're looking for someone who doesn't only have the best of things to say about the project. You want someone with a pragmatic approach to give you the pro's and the con's of the project without any prejudice. This will give you a level-headed ground to base your buying decision off of.
Was there a pre-mine or an IPO when the coin was first released?
A pre-mine situation is not always the worst thing because some developers actually use the pre-mine amount as an initial investment in the best interests of the coin. But, it is very important to know if there was a pre-mine, how much it was, and what it's intended use is. A project team which is honest and clear about this from the start is less likely to raise red flags.
Are the developers linked to the project?
So many exchanges perform a KYC (Know your customer) and it is our duty to perform our own version of a KYC (I'll dub it the "Know Your Company" check). There is no way to build trust with someone you do not know, so a developer who is linked to their project and can be identified this way is much easier to trust.
What is unique about the project?
Is the project just another one of the thousands of bitcoin spin-off's and forks, or is it a project built around a genuine special feature that provides something new, improved, or unique? You're looking for the reason the coin actually exists here. If the reason is not good enough, then the coin may not be worth it.
There are many factors to consider before buying a cryptocurrency as an investment. Do you consider anything I don't when investing in a particular cryptocurrency? Why not let me know in the comments below? I'm eager to learn from you too!
I hope this helped you with your decision making. If it did, why not leave a like and a tip below? If you start an account, you even get some of the tip for reading!
Until next time.