‘My friend just lost 10,000 USD in the crypto market’ this is what I have been hearing lately from many of my friends, colleagues, even relatives. And this is very very sad to hear, especially when today we have so many places available to learn the right information and INVEST WISELY.
Do you know why I have made these two words bold? Because many people simply do not understand them or just don’t know how to understand them in the right way.
I scoured the internet and used my experience to come up with a 7-point checklist to help you make the right decision when investing in crypto currencies.
My 7-Point Checklist for Investing in Crypto Wisely
1. White Paper
Check if the cryptocurrency has a solid and professional whitepaper.
Why whitepaper? Since most of you think whitepapers are boring (I personally think that too).
A cryptocurrency's white paper is a foundational document that outlines the project's purpose, technology, and goals. It provides insights into the problem the cryptocurrency aims to solve, its proposed solutions, and the technical details.
When you read the whitepaper you understand if the cryptocurrency has a solid use-case or not.
2. Social Media Presence
Next, you need to make sure that the cryptocurrency has an active social media community. A community means that more than a few people know about the project. In simple terms, it means it will have more buyers. Platforms like Twitter, Reddit, and Telegram are hubs for discussions, updates, and announcements. Look for a strong and supportive community, as it often reflects the level of interest and trust in the project.
3. Team
Do you know who is behind the cryptocurrency that you plan to invest in? Research the team members' backgrounds, their previous projects, and their roles within the cryptocurrency.
The more strong the reputation of its team members, the more likely they are to navigate challenges and drive the project toward success.
4. Partnerships/Investors
If a cryptocurrency has partnerships with established companies or organizations, it can add credibility and trust to a cryptocurrency project. For example, Solana is backed by some of the biggest giants in the financial market, making it a trusted coin to invest in.
There are many cryptocurrencies in the market that are just flaky. You need to avoid them since you will be investing your hard earned money. Don’t just rely on someone else’s influence when investing in any particular currency. Learn about investors, funding rounds, and use cases before you make a decision.
5. Market Metrics
Another crucial point for any crypto currency is to learn about its market dynamics. Who has the largest percentage of share of the cryptocurrency? If the founding team still has more than 30% of the cryptocurrency, this is already a red flag since they can make or break the market.
Analyzing market metrics such as market capitalization, trading volume, and liquidity is essential. High market capitalization indicates a larger and potentially more stable project. Consistent trading volume suggests active interest and participation, while liquidity ensures you can easily buy and sell the cryptocurrency.
6. Price History
Almost all altcoins follow the rhythm of Bitcoin. You need to review the price history of a cryptocurrency to understand its past performance and volatility. Look for patterns, significant price movements, and market trends. This analysis can provide insights into the cryptocurrency's stability and potential for future growth.
7. Utility
Last but not the least… utility. What is the use case of cryptocurrency? Is it just a meme coin? Or does it have some financial or structural utility? Take Filecoin. It offers verified rental storage utility to its users. This is just one coin. You need to look at every coin you plan to invest in to see its utility. If the coin doesn’t have any apparent utility, it is most likely a sham. Stay away from long-term investment in such coins.
By thoroughly assessing these factors, investors can make more informed and strategic decisions when choosing cryptocurrencies to invest in.
For a comprehensive overview of the market and to start your investment journey, visit Binance.
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