According to statistics released on the CoinMarketCap website, 14,106 cryptocurrencies with a total market capitalization of USD 2,7 trillion were being traded on 430 exchanges worldwide. Given these statistics, it is quite simple to get overwhelmed and confused about which cryptocurrencies to choose for investing in. In this post, we will discuss how to identify the best cryptocurrencies for investment purposes.
When picking a cryptocurrency for investment, there are numerous factors to consider.
Here are four crucial considerations:
1) Market capitalization
One strategy for determining which cryptocurrencies to purchase is to invest in them based on the market capitalisation of those coins.
2) Quantity of coins to be mined and the present supply
Determine if a given coin will have a limited supply. You must also consider the number of coins already in circulation. For instance, Bitcoin’s total supply is restricted to 21 million coins. There are 18.7 million coins in circulation, with only 2.3 million more coins to be mined.
Increasing numbers of individuals are investing in Bitcoin, resulting in a daily increase in its demand. However, availability is restricted. The growth in demand and limited supply causes the price of every digital asset to rise, and Bitcoin is no exception. Therefore, while determining which cryptocurrency to acquire for investment purposes, you should consider the total supply and the amount of the cryptocurrency that is already in circulation.
3) White paper
Every cryptocurrency has a white paper that describes its objective, issues it will answer, underlying technology, etc. Additionally, the white paper discusses the coin’s designers’ vision. If the white paper looks plausible, you can consider making a first investment in the currency.
You can determine if the white paper’s stated goal is being executed in the actual world over time. If the answer is affirmative, the coin’s value will rise. Consequently, you may decide to invest more in the cryptocurrency in question.
4) Use cases
Use cases of the currency are one of the most essential aspects of the white paper. It is one of the primary aspects that will influence the acceptability of its users/investors. Over time, further use cases may be created. The greater the number of use cases, the more the coin’s acceptability and value rise.
Let’s explore an example. Ethereum is one of the finest technological application cases now. Due to these applications, Ethereum has the second-largest market capitalization behind Bitcoin. It might be one of the greatest cryptocurrencies to purchase today.
If the number of use cases for a coin decreases, there is a greater chance that the coin’s value will decrease, and it will not survive. Therefore, you may consider the coin’s use cases as a major aspect when picking which cryptocurrency to purchase.
As an investor, you must allocate your assets appropriately. You should diversify across several asset types, such as equities, debt, gold, real estate, and cryptocurrency assets. And inside the cryptocurrency market, you should diversify further by purchasing other cryptocurrencies. This may be determined by criteria such as market capitalization, demand and supply, use cases, etc. Lastly, like with SIPs for mutual funds, it is preferable to invest little sums on a monthly basis rather than a large payment.Do not forget about such a useful tool as price predictions. With its help, you can not only find out the dot price prediction for the next year, but also, for example, find out the electroneum price prediction 2025 and even 2030.