How to Choose a Cryptocurrency to Invest In

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The cryptocurrency world has come a long way since 2009 when Bitcoin was first introduced. In 2013, there were just seven cryptocurrencies listed on CoinMarketCap, and as of 2022, there are approximately 10,000 active coins. With this many coins available, choosing a selection to build up your portfolio can be tricky. Many new traders begin trading with popular coins such as Bitcoin and Ethereum, but for a balanced portfolio, it’s recommended to also invest in a mix of altcoins. But, you may be asking, how do I know which are the best cryptocurrencies to invest in? 

Of course, you can simply Google “The best cryptocurrencies to invest in” and then buy whatever the first article recommends. However, if you want to become a truly experienced and knowledgeable trader, then you should do your own research to find suitable coins to invest in. If you’re not sure how to get started, then take a look at some of the key factors to consider when choosing a cryptocurrency to buy! 

The First Step for Beginner Cryptocurrency Traders

For those who have never traded cryptocurrency, you should consider signing up for a crypto platform before you start thinking about which coins you want to invest in. A crypto platform’s role is to connect its users with top-notch brokers who are best suited to their trading needs. All you need to do to sign up is provide your name, country of residence, and contact details. Shortly after, you’ll be contacted by a team member and then connected with a broker who will support you as you trade. 

Your assigned broker can provide a wide selection of resources and tools that you’ll utilise when trading cryptocurrency. Some tools have been tailored towards first-time traders, such as demonstration accounts. These accounts allow traders to trade on the crypto market with dummy funds rather than real money. This gives inexperienced traders the opportunity to practice trading without risk and learn more about how the crypto market works in a more relaxed environment. If this tool appeals to you, then remember to discuss it with the crypto platform’s team member after you have created an account to ensure that you are connected to a broker who can provide it for you. 

Overall, with the help of your broker, you can avoid common trading mistakes and make informed investment decisions, increasing your chance of making a profit! There are plenty of different crypto websites to choose from, but if you want to sign up for a platform that instantly and safely connects you to a reputable broker, we recommend websites like bitcoin-up.io.  After signing up and discussing your trading goals with your broker, you’re ready to start thinking about which cryptocurrencies to invest in. 

Four Factors to Consider When Choosing a Cryptocurrency to Trade

With so many different cryptocurrencies available, traders can often be overwhelmed by their choices. However, if you want to invest in crypto coins that have a lot of potential, then take a look at some factors that you need to consider before trading! (Please remember that crypto trading is very risky, and you should always do plenty of research before investing in any coins and never risk money that you’re not willing to lose)

1. Whitepaper

A whitepaper is a document that describes a new concept, such as a cryptocurrency, in technical detail. You can find information on a coin’s whitepaper, such as why the coin was created, the developer’s goals, which problems it aims to solve, and the technology behind the coin. The whitepaper can usually be found on the cryptocurrency’s official website and should always be read (even if you just skim it) before you decide to invest in a particular coin. Some crypto developers, such as AvaLabs (creator of Avlanache (AVAX), will have multiple whitepapers on their website.

Reading the whitepaper before investing in a coin is important because it can give you a better idea of how it will likely perform. Of course, it’s impossible to predict how a coin’s price will fluctuate in the market, but by reading the whitepaper, you can learn more about the developer’s vision and decide whether it is realistic or not.

2. Market Capitalisation

The market capitalisation (or market cap) of a coin is determined by the coin’s current price multiplied by the total number of tokens that are currently in circulation. For instance, if a cryptocurrency has 300,000 coins in circulation and each coin is worth $1, its market cap is $300,000. The market cap for coins is generally divided into four categories – Large Cap (> 5 billion), Mid Cap (1-5 billion), Small Cap (500 million – 1 billion), and Mirco Cap (< 500 million).

Looking at the market cap of a coin before investing in it is important because it will help you gauge the coin’s volatility and growth potential. Coins with a high market cap will likely be a more stable investment compared to coins with a lower market cap. So, if you’re looking for a low-risk investment, then buying a coin with a high market cap is the best option for you. Whereas, if you want to make a high-risk investment that could potentially lead to a high reward, then you should consider buying a coin with a low market cap. To find out the market cap of a coin, you can head to a crypto marketplace such as CoinMarketCap or check price predictions on websites like QuadrigaCX.

3. Supply 

On crypto marketplaces, you can also find out the max supply, the circulating supply, and the total supply of different cryptocurrencies. The circulating supply is the number of coins that are currently in circulation, the total supply is the number of coins that have been mined, and the max supply is an estimate of the maximum amount of coins of a certain cryptocurrency that will ever exist. The supply of a coin can drastically influence its price, and those with a low supply with high demand will have higher prices compared to those with a high supply and low demand. 

4, Use Cases

A cryptocurrency’s use cases is another crucial factor that can help you determine how well it will perform. You can usually find a coin’s use cases through the official website or the whitepaper. Certain coins, like Ethereum, have fantastic use cases that aim to solve problems through technology such as smart contracts and decentralised applications (dApps), whilst others have simply been created to use as a form of entertainment. One notable example of coins with little to no use cases is meme coins, with the most well-known meme coin being Dogecoin (DOGE). Typically, coins that have valuable use cases are more likely to perform well in the crypto market as traders will have more incentive to buy them. 

Recap 

Overall, with thousands of cryptocurrencies available, many traders can become easily overwhelmed with their choices. Rather than simply investing in well-known coins such as Bitcoin (although this can still be a worthwhile investment), you can begin investing in altcoins that have a lot of growth potential. Before you begin trading any coin, you should consider the four factors that we’ve mentioned in this article – Whitepaper, Market Cap, Supply, and Use Cases. 

Considering these factors and doing your own research will help you learn more about how a coin is likely to perform. For example, coins with a keen development team who have released a detailed whitepaper will likely have all the support it needs to increase in price. Additionally, using a crypto marketplace to check out the max, total, and circulating supply and the market cap will help you estimate a coin’s volatility. By comparing these metrics with your risk tolerance, you can determine whether or not a coin you have your eye on is worth investing in. 

Finally, discovering the use cases of cryptocurrencies will allow you to predict the future growth and investor acceptance of different coins. Coins that have no use cases and have been created for entertainment purposes (such as many meme coins) are likely not going to experience the same growth as coins that have been created to solve specific problems. Of course, not even expert traders can truly predict how well coins will perform. But still, if you carefully consider these factors before investing, then you have a much better chance of building up a profitable and stable portfolio!  

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