FinancialCentre Expert elaborates on How to Evaluate Any Cryptocurrency’s Investment Potential


London, UK — “The future of money is a digital currency,” says Bill Gates. Cryptocurrency is considered the next generation’s currency, and currently, it is just an addition to money. As Elon Musk said, “Paper money is going away.” All the investors are always curious to invest in crypto. Crypto-Curious investors have changed the face of the cryptocurrency market over the past year. Bitcoin or Ethereum is always the first choice for such investors because they have the longest track record in considering future potential. Many investors want to go further, but it is very hard for them to choose and evaluate from a lot of options available in the market. They always think about risks and failures before investing. Elon Musk once said, “Failing is an option here. If things are not failing, you are not innovating enough”. Along with risk factors, there are other various factors to be considered first, such as price, market capital, trading volume, etc.

  “Before you look into the price action, you actually have to look at what we call the fundamental analysis, which is picking the right asset for the right goal,” says Kiana Danial, founder of Invest Diva and an author of “Cryptocurrency Investing for Dummies.” 

Dozen of experts and analysts gave their opinion on how to invest in crypto safely and smartly. There are few ground rules whether you are investing in bitcoin or new coins. These rules are as follows.

  1. You should keep your crypto to 5% or less than your portfolio. 
  2. You must have to make sure that you have enough emergency funds available or that you have paid off any of your high interested debt and secured a retirement plan before investing in tokens. 
  3. Beginners must begin to invest with the most popular mainstream cryptos, such as Bitcoin and Ethereum. 
  4. You should only invest in such cryptos that you would be OK losing.

However, it would be best to evaluate the investment potential for your favourite cryptocurrency before investing in it. According to David Green, a Financial Expert at FinancialCentre, investors can evaluate the potential of a cryptocurrency for investment through the following ways:

Understanding Crypto Fundamentals:

“Focus more on the project itself, the problem it’s solving, and where it is actually deriving its value,” says Danial. It would be best if you had a fundamental understanding before going deeply into crypto and looking at the technical factors which affect the crypto’s market value. Your own research about cryptocurrency is very important before investing.

Project Websites and Social Media:

Project websites and social media play a vital role and provide a phenomenal overview of crypto. There are various project websites and a lot of a number of reviews available on social media regarding all the crypto tokens. You can search for them and take an overview of the token you want to invest in. It helps a lot to evaluate and consider profit and risk factors wisely. You should check various social media channels and project websites to get a sense of how socially active its community is, the team, and the project itself. These project websites share openly share details about the project, the project’s team, its white paper, and its roadmap openly. 

Major Investor:

Best Investors are the goodwill for the token. Before investing, you must search about the other investors who invested in the token before. Renowned and profitable tokens are being invested by various famous investors and well-known big firms and companies. It shows that they have their trust and belief in such a project’s long-term viability. 

The Community:

The community is also playing its role in crypto’s value judgment. The community’s support can make or break the project’s potential. Sometimes, the community creates an exceeding hype, but in actuality, it just masks the project’s value and utility. So it would be best if you considered all other factors too, along with the community. 

“It can be a very confusing environment to figure out what’s what and who is who, especially when you have a lot of people really pumping it or being very zealous about it,” Doug Boneparth, a financial advisor and president of Bone Fide Wealth in New York, told NextAdvisor.

Beginner’s Guide to Analysing Crypto Pricing Data:

After completing your research regarding the initial general evaluation of crypto’s potential growth, then it’s time to look at more technical issues. 

“I look at the charts to see if I want to buy more and when would be an optimal price to buy,” says Danial. “This is after selecting an asset that matches my risk tolerance and my financial goals.”

According to analysts and experts, technical analysis of crypto is a bit trickier than stock. There are various factors to consider while doing a technical evaluation of crypto: market capitalization, trading volume, trading history, circulation total, maximum supply, etc. The further explanation regarding these technical issues are as follow;

Trading History;

To get a high-level overview of the price and performance of the project, you must look at the daily, weekly, and monthly trading history of the selected token. A steady rise in prices over a long time and such positive price trends regarding trading history show crypto’s long-term potential.

Market Capitalisation:

According to experts, market capitalization is significant in evaluation. It can be calculated by multiplying the crypto price by the number of the total tokens in circulation. Generally, higher the value of the market capitalization, the higher the safe investment. You do not need to invest in crypto, which has very low market capitalization, because it shows that it’s probably a new token in the market with higher risks. 

Trading Volume:

While evaluating an investment’s potential, you must have a glance at the trading volume of the cryptocurrency. A low trading value is a red flag, and it shows that this token can be bought or sold easily. For investors who want to hold their tokens for long-term benefits, this trading volume research is very important. 

Circulating Total and Maximum Supply:

It is very important to look at the crypto’s total circulating supply and its maximum token supply. Investors must consider the predictability of supply. Total supply means the total token created by the project, while the total circulating supply means how many tokens are circulating in the market. Sometimes tokens must be circulating in the market, but they are lost or stolen in actuality. A large influx in circulating supply can lower the price, and you can lose your tokens. 

Final Thoughts:

Before investing in crypto, you should initially consider all these factors mentioned above, but it is important to know that cryptocurrency is highly volatile and new. Cryptocurrency is different than the stock exchange, and matrices used in evaluating stock often cannot be used here in crypto to evaluate its investment’s potential.

Disclaimer: Our content is intended to be used for informational purposes only. It is very important to do your own research before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on this article and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

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