Cryptocurrencies are valued by investors because they are a new technology capable of transformation, as well as being a store of value – attributes that have seen several cryptocurrencies soar in value since inception. That said, cryptocurrencies have also been used to enable fraud, scams, and theft.
There are thousands of cryptocurrencies in existence.
While many of these cryptos have little to no following or trading volume, some enjoy immense popularity among dedicated communities of backers and investors. In any case, investors are always on the look-out for a cryptocurrency that will provide a good return on investment.
Here are some of the things to look out for when you are thinking of making your first investment in cryptocurrencies:
A bit part of a cryptocurrency’s success is it’s following – so look out for cryptocurrencies with strong communities and loyal followers because that shows people have a genuine interest and belief in the cryptocurrency.
Some of the key platforms where communities gather around crypto include Reddit, Discord, Twitter, Telegram, and Youtube.
Run through some subreddits, YouTube channels, and some of the feedback from their communities and see what they’re saying about your potential investment.
If you’re confused about the coins, going to forums and checking out the community on Reddit is a great way to start understanding the hype behind an altcoin and whether you should make an investment.
You’ll also find on Reddit that some of the more difficult and technical concepts are often broken down and explained simply in these forums.
You will also want to be doing checks to ascertain a coin’s credibility. Check out their social media pages, verify some of the details they are talking about. You don’t want to be caught out by scammers or amateurs.
Researching the team behind a given cryptocurrency is a key aspect that no one should ignore. Some of the aspects that you should zero in on when looking into a team include:
Which particular people are behind the cryptocurrency?
Do you trust their expertise?
Do they have a proven track record or experience?
While looking into the team, also check out the people occupying the top positions such as the CEO and CTO.
For the leaders, you want to make sure they are committed to the project.
Ask yourself questions like:
Are the leaders invested in the cryptocurrency?
Check out for their experience, have they worked in other projects before?
You can also research them via news reports and interviews
Arguably, the technology is the most important aspect when looking at a cryptocurrency. However, most cryptocurrencies are brought up by the same ideas, so its worthy to look out for the technology that stands out.
For example, while bitcoin was the first cryptocurrency, Ethereum changed the game when it introduced smart contracts and the Ethereum Virtual Machine, which paved the way for different applications of blockchain besides cryptocurrency.
So always be on the lookout for the best ideas, but to do that you will probably need to dig deeper than most people.
Perhaps the most exciting aspect about any new blockchain or crypto project is the white paper. This is where the projects outlines its technology, purpose, and overall vision.
It is therefore the best place to go to get a beyond surface-level sense of what a particular cryptocurrency is all about.
You might have to wade through a little technical jargon in the white paper, but don’t let that put you off. It’s 100% worth reading because it’s such a rich source of insight.
Plus the more white papers you read, the better you’ll become at identifying the long term winners.
As an investor, you want a coin that is a winner, and to do that, you need a project that has a strong vision that it wants to implement.
You want to make sure this coin will be around for at least the next 5-10 years, and if they’re not thinking long term then you should be seriously worried. Good thing is you already have materials, such as the whitepaper that you can go through to help understand the vision.
Furthermore, several projects also provide a roadmap of where they want to get the project which provides a simpler outline of how to get to the vision they are talking about.
You should only invest in a cryptocurrency with a strong vision that can go the distance and pay off in the long-run.
While short-term gains can be exciting and you might be thinking about swing trading, you should still think about where the cryptocurrency is going to be in the next 5, 10, 20 years, etc.