Cryptocurrency is a lucrative investment opportunity that comes in the form of investment in crypto coins. Every day there’s a new crypto project launched in the market. With a daily rise in the numbers of cryptocurrency projects, it’s turning out to be a difficult task for crypto investors to choose the best among the list.
Not being aware of the basic criteria of cryptocurrency selection puts you in a grave situation of betting on the hype than going for the right project. Therefore, I have written this post while keeping the investment focus in mind for cryptocurrency investors. I have shared the top 5 cryptocurrency investment criteria that will help you clear the clutter and invest your hard-earned money into potential projects. Let’s dive in –
Cryptocurrency Investment Criteria –
- Identifying the Fundamentals
- Community Engagement
- Market Presence
- Founders and Investors
- Liquidity and Circulation
DISCLAIMER: This post is created for information purpose only. The readers are advised to do proper research before investing in cryptocurrency.
Identifying the Fundamentals:
Have you ever tried to reach the destination without the knowledge of the place you’re at? That’s what the fundamentals are about. Fundamentals show you where you’re at and what exactly you need to reach your destination. In cryptocurrency, it gives a clear picture of the project’s potential by asking these critical questions –
- Why are you investing in a crypto project?
- Does the project have a use case?
- What is its future potential?
- Does it solve a real-world problem?
If you ask these questions before investing in any crypto projects, you will get a clear understanding of the project. In short, it will help you invest money in the right digital asset.
There are bundle of things that can be studied in Fundamentals. Please read my post on Cryptocurrency investor to get a detailed understanding of Cryptocurrency fundamentals.
The second most important criterion of choosing the cryptocurrency project is exploring the community. The term community refers to the online groups that are being created by crypto investors to spark discussions and share knowledge about the coin they’re interested in. As a cryptocurrency investor, it’s your duty to visit the official website of the crypto projects and get knowledge of their official social media handles.
As a rule of thumb, Twitter & Reddit are the two prominent social channels that attract the right-minded people under one umbrella and promote quality discussions. When it comes to cryptocurrency, between the two, Reddit is a clear winner to study the community engagement and updates.
There’s no point to wander around and keep looking when you can get all the information at your fingertips. Join the groups and read the discussions. Analyze the quality of conversations and ask yourself these questions –
- What is the frequency of post publishing in the group?
- What is the average ratio of engagement for the last 5 posts?
- What kind of discussions are taking place? Is it LA -LA – LAND or a constructive one?
- Are the members optimistic about the project or trying to bailout?
Community is the source of knowledge with an indicator of project sentiments. Join me on Reddit if you wish you meet me there.
By now, you must have identified the fundamentals and joined the project community. It seems you’re all set to invest your money into the “To the MOON” project. But wait, did you find time to study its market presence i.e have you studied how well the project is marketing itself?
Just like every product or service-based company market itself to make the customers aware of its offerings. Similarly, a crypto project needs a good marketing strategy to market itself.
There’s no use in investing in a project with strong fundamentals and community if it fails to market itself. Without making noise the project dies a slow death. Therefore as an investor, you have to make yourself aware of the reach of the project, the events organized by the project, and the coverage it gets from PR. Cryptocurrency projects like Ripple, Ethereum, and Polkadot are prime examples when it comes to marketing.
Watch the complete video on Cryptocurrency investment criteria –
Founders and Investors:
Most of us like to watch the movies of our favourite actors. Even when he plays a negative role, we tend to appreciate his character. That’s the power of founders and investors in the world of cryptocurrency.
A project built by an expert group of individuals with a strong background experience and knowledge tends to attract high investments and community support compared to a project run by a newbie with little to no knowledge of the field.
The best examples are the projects like Cardano (ADA) and Polkadot Crypto (DOT). Both the projects are founded by the co-founders of Ethereum (ETH). DOT and ADA attract a lot of attention for the revolutionary idea they’re working on i.e parachains. Because of a strong background and a strong team, the investors are hungry to jump in and take a share of the project.
Clearly, an intelligent investor has to study the background of founders and the skillset of the team to be sure of promises that the project wishes to achieve.
Liquidity and Circulation:
Once you have figured out the best cryptocurrency investment, the last and final step is to estimate its liquidity and circulation. If you cannot buy or sell the coin on any of the leading exchanges, the value of the coin will be stagnated for a long period of time. Never invest in a coin that isn’t listed on an exchange.
For example, cryptocurrencies like BTC and ETH can be easily bought at any of the leading exchanges that result in a huge influx of investor’s money hence rise in asset liquidity. Whereas cryptocurrencies like DGB and STRAT aren’t much in circulation compared to BTC or ETH.
Coming to circulation, studying the cryptocurrency circulation or the supply limit is equally important. Coins with a clear use case and limited supply have higher chances of rising in value as compared to the coins with infinite supply and no use case. VET and XRP are examples of coins with a clear use case while DOGE and SHIB are the coins running only on the hype with no use case.
That’s about cryptocurrency investment criteria. In my next post, I will explain how to read the tradingview charts. Do like, comment, and share my post and help us spread the knowledge. For similar posts, remember to visit our section on Cryptocurrency.
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.