What to consider when identifying Cryptocurrency with the most potential

Finding a cryptocurrency to invest in today has become a challenge to many wanna-be investors as well as seasoned investors looking to add up to their crypto portfolios.

In a market with over 10,000 digital coins, choosing the right coin to pour your money into can be frustrating as it entails a lot. After all, the only certainty in the crypto market is uncertainty.
There are a lot of factors to consider before testing the crypto waters. There is an even bigger set of factors to consider when trying to invest in a relatively cheaper coin with hopes of reaping a hefty profit in the days, months, and years to follow.

While crypto investment can be risky, it can also be gratifying, that’s of course if you happen to invest in the right digital coin. There are new projects on the market every day with the potential of returning huge financial gains. There are also investors looking to grab these opportunities. However, many of these new coins fail to reach the heights they’re tipped to go and as such, investors should be wary of what they put their money into.

This post will cover some of the factors to consider when identifying and investing in cryptocurrencies.

1. Purpose behind the coin

All cryptocurrencies are not the same. Different coins are equipped with different features and functionalities, separating them from the rest. It is vital to identify these differences in a project before investing in them. An example is Ethereum’s ether (ETH) token which was created for use as a payment system on the Ethereum blockchain. The coin is designed for scalability and enables smart contracts and decentralized applications (DApps).

Many coins on the cryptocurrency market are just clones of already established ones with minor tweaks such as increased supply, change of name, and faster transactions. These coins fail to gain traction and without any real features, they just collapse and fade away from the market. This is evident in the number of digital projects that failed in the early days of the crypto boom.

Over 1,500 coins have failed since 2013 after their market debut, whilst over 500 coins have been busted as being just fraudulent projects. 33 coins have also been proven to have no plan or purpose in addition to over 230 failed ICOs.

2. Value

The value of a digital coin is not limited to just monetary worth. When determining the value of a coin, its current worth and potential future value should be considered. Many digital projects have some intangibles that could catch the eye of an investor who knows what he/she/they are looking for. This could be NFTs from your favourite artist, creator, etc.

3. Read the White Paper

A white paper on any crypto project is a detailed document created by the founders or developers of a project. The document entails comprehensive information about the project’s concept, technology, purpose, and implementation. It usually begins with an introduction consisting of an overview of the project’s vision, goals, and the problems it aims to solve. It also covers in-depth technical details, tokenomics, Legal and Regulatory Information, a roadmap, and information about the team (Founders, developers, advisors, etc.) behind the project.

Investors should be on the lookout for suspicious white papers that normally give vague and cryptic explanations, complex language, and jargon as this could indicate a dubious attempt by the team to conceal problems behind the project by deliberately making it difficult to read.

A well-written white paper aims to build trust and attract investment by demonstrating the project’s viability

4. Evaluate the team behind the project

Another crucial point to consider when choosing a crypto project to invest in is the project’s team. As mentioned in the previous point, the team behind a cryptocurrency project constitutes an important factor in the potential success of a coin.

Experience, past achievements, qualifications, operational synergy, and skills are all important traits to look out for in a team behind a crypto project. Previous projects, educational backgrounds, and reputation amongst many more, should be thoroughly reviewed as a credible track record which includes previously successfully launched cryptocurrency projects and limits the investment risk.

5. Technical Analysis

Technical analysis offers objective insights into any digital project, backed by real data accumulated over the years. This analysis helps in identifying past support and resistance levels, trend lines, and recurring chart patterns including triangles, double tops or bottoms, etc. A thorough understanding of these analyses helps potential investors to make predictions using price patterns and market trends. Investors can also learn to tell potential risks by past behaviour.

Technical analysis should always come first before factoring in fundamental analysis based on subjective factors such as news and market sentiment.

6. Community behind the project

The community behind a crypto project is another important factor to consider when choosing coins to invest in. A large, vibrant, and engaged community behind a crypto project signifies the level of interest and trust in the project. Regular open communications, updates, and feedback amongst the community can help drive up the value of a crypto project and also attract new investors and partnerships.

Offering free education and resources for members of a community helps in promoting adoption and enhancing understanding of the cryptocurrency project.

 

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