How To Pick The Right Cryptocurrencies To Invest In
By Alluva on Altcoin Academy
Bitcoin, the world’s first cryptocurrency, was first unveiled to the world over a decade ago. At the time, there were no competing digital currencies or unique use-cases for the underlying technology. Fast forward to today though, and you will find that the crypto industry has grown beyond recognition from those early days. According to data from Oddup, there are over 2,000 cryptocurrencies globally, each looking to fill a particular niche and attract a large user base.
Cryptocurrency has become a viable asset class of late, giving investors a great way to diversify their portfolio. This is especially true when you consider that some currencies have skyrocketed in value over time. In a handful of cases, cryptocurrencies have delivered far greater RoI (return on investment) than any other asset type.
Conversely, however, cryptos have garnered the reputation of being high-risk, high-reward assets. New tokens enter the market every single day, but only a few turn out to be successful in the end. Moreover, scams and fraudulent activities like pump and dump schemes make investment decisions difficult for even the most veteran of investors. (We’ve got an article coming up soon on how you can avoid pumps and dumps.)
Price volatility is another major concern. Unlike traditional assets, crypto prices can swing wildly from day to day. As a result, it is both vital and difficult for investors to accurately identify digital currencies that have the best growth potential.
Risks In Crypto-Investment
Overall, the risks in cryptocurrency investment can be summarised to include the following:
- Lack of Transparency: The crypto industry is full of people and businesses trying to push their agendas for self-gain.
- Price Volatility: Digital currency prices can gain or lose a significant amount of value overnight.
- Lack of Experience: Cryptocurrency development teams can sometimes lack the necessary expertise or technical ability to deliver the project’s goals.
- Scams: Theft and fraudulent or predatory behavior are unfortunately commonplace in the crypto market. Investors need to be aware of these tactics and insulate themselves from them.
Investors are always on the lookout to overcome these problems, make good investment calls, and improve returns. To that end, here are some factors to look out for while scouting for potential crypto investments.
Vetting A Cryptocurrency
There are four major factors investors need to look into when considering any cryptocurrency as a potential investment option.
Cryptocurrency Vision
The first step to understanding a cryptocurrency is understanding its purpose. All too often, crypto and blockchain are used when the concept does not actually require them. This is why the first goal is to determine whether the product or solution in question is actually being enhanced with the use of crypto and blockchain, or whether these are being included only to garner increased customer interest. If the team behind the cryptocurrency aims to deliver lofty goals that seem unrealistic, it would be wise to dig further and see if there have been any technical snags. Reading the white paper should give a nuanced explanation of what the crypto has set out to achieve and where its creators believe it will be in the next few years.
If a currency has been around for several years, it is worth researching what it has accomplished so far. Most large cryptocurrencies such as Ethereum, for instance, already have several real-world applications that showcase the cryptocurrency’s strength and utility. However, smaller or newer cryptocurrencies are more likely to be vapourware, in that, there is no telling if the team will be able to realize its vision.
Team
A cryptocurrency’s development and advisory team are instrumental to the project’s success. Learning more details about each and every individual on the team can help potential investors gauge how much expertise has been dedicated to the project. Notably, however, even a large and experienced team should only be projecting realistic goals and returns.
Individuals in advisory roles also play a vital part in the success of a cryptocurrency. Researching their past accomplishments in the field, educational expertise, and other crypto affiliations can go a long way in understanding what sort of guidance a particular project is getting.
Market Validation
Even the best cryptocurrency out there does not stand a chance if the community at large does not accept it or see any value in it. Since the market for any digital asset is built on the economic principle of supply and demand, crypto is only as valuable as the following that it attracts.
For this reason, it is prudent for investors to only look at currencies that have already managed to establish themselves in the minds of the public, regardless of whether this holds true for an existing, new, or upcoming currency. While under-rated cryptos may deliver far greater returns, they are not always the smartest or safest investment option.
Cryptocurrency Ratings
While the community is an integral part of a cryptocurrency’s success as well as visibility to potential investors, it is critical to separate community support from biased opinion. Reviews that are undisclosed as being paid and sponsorships are surprisingly common and can motivate bad investment decisions.
Hence, while ratings and reviews need to be referred to and even trusted, it is equally important to look behind the curtain and identify the factors that go into the ratings. This ensures that they are reflective of the true market sentiment.
The Solution That Alluva Offers
Alluva aims to make crypto recommendations safer and absolutely transparent. Users registered on Alluva can share their analyses and insight via cryptocurrency price predictions and ratings; these users will be incentivized on the basis of accuracy.
These predictions can help individual and institutional investors make sense of the crowded market and easily pick the crypto best suited for their strategy. At the same time, Alluva offers existing and upcoming analysts the perfect platform to earn from their knowledge, enabling those who have the knack to analyze all the above but want to start small or earn without having to invest large sums.
Get more information on Alluva by visiting our website here. You can also take a quick look at what Alluva is all about, and how it’s set to drastically improve cryptocurrency investment here.