Buying a cryptocurrency: 6 ways to Evaluate It
The idea of buying a digital currency for the very first time may seem overwhelming. However, there are intelligent and efficient strategies you can employ to make the decision simpler.
The cryptocurrency market attracts the interest of more than just experienced investors but also people who do not know about buying cryptocurrency. Although Bitcoin ( BTC) was the first cryptocurrency, which remains the largest by market value, It wasn’t long before alternatives to bitcoin (altcoin) came into existence, like Ethereum, DOGE, and many others.
There are currently 19,000 cryptocurrencies worldwide, and many don’t have a bright future. It is therefore essential to understand how to discern which one is worthy of your time and money. In this article, you’ll discover seven ways to assess the value of cryptocurrencies so that you can invest with greater certainty.
- Visit the project’s site
Every cryptocurrency that is worth your time and money should have websites. Today, creating websites is fairly easy, and any business that is serious about its business should have a current, informative, and informative site.
Things to look out for on the website of a cryptocurrency:
- It’s up-to-date and simple to use
- Free of spelling and other mistakes
- Team members and collaborations
- The token clearly defines its purpose
- Offers a white sheet of paper
- Take a look at the white paper
A white paper on cryptography is among the most crucial tools for evaluating a cryptocurrency because it is the foundation of the project’s plan. It’s a dependable document that defines the objectives and strategies for the cryptocurrency’s use. Additionally, white papers act as a guideline for the token, and they’re usually one of the first documents prospective investors read before giving funds to the project.
Additionally, white papers on cryptocurrency are also where you’ll find details about the tokenomics of a cryptocurrency. The tokenomics will provide details on how they will share the coins with investors and its supply limitations. It also contains information about creating new tokens and burning tokens when included in the blockchain.
Some white papers are so technical and intricate that you don’t need to know all of the technical specifications; however, knowing who the group responsible for the work is, what their project goals are, and how they’ll accomplish them is vital.
A white paper that is not present is a warning sign, and any reliable white paper must not contain spelling or grammar mistakes.
- Scrutinize social media channels
To better understand the crypto community, you must first check out its social media profiles. Most cryptocurrency-related projects include Twitter, Reddit, or Discord channels – or in most cases, all three they control.
Note the number of people they follow and their interaction with the comment section. Examine whether community moderators respond to inquiries or promote events and actively participate in discussions. For instance, if you pose legitimate questions on their Discord channel but are being dismissed or told that the moderators “just don’t get it,” it’s a sign of trouble.
Be aware of frauds on crypto-related social media. Beware of organizations that are too slick in their marketing strategies. A successful project will not need to resort to these tactics.
- Examine the team of the project and the partnerships
The success of cryptocurrency is dependent on the team members of its creators. Numerous reputable coins have project members involved in profitable coin launches. This can help build confidence within the community. You’ll be able to locate the founders and important members of the team in the white paper and on the website. Please find out more about the team’s background to discover its reputation and thought leaders within the blockchain community. A team with a track record of success with their projects is an excellent indicator, whereas a team that is new to crypto may not have the expertise to reach its goals.
Alongside the project team, look at the list of partners, If any. It is usually available on the homepage at the top of this website. There are times when partnerships are found with well-known companies like Google, Amazon, JPMorgan, Visa, and IBM. In the case of all things crypto, conduct your research and make sure that the partnerships are genuine.
- Review the history of price
As well as understanding market statistics, you must be aware of the price history of a particular cryptocurrency. The cryptocurrency market is highly unstable, which is why it’s common to observe price fluctuations; however, look for an increase in price that is gradual over time. It is important to look at the price across different intervals, including the “all-time” view and “all-time” history view, to gain as comprehensively an understanding of the longer-term and short-term price developments as possible.
Avoid coins that show excessively high prices followed by sudden drops, as it could indicate the possibility of a pump-and-dump scenario, a fraud in which a coin’s value is overinflated because of fake hype, then removed to make a profit. It is also known as a “rug pull.”
- Check if the cryptocurrency comes with a utility.