Today I want to share with you 6 factors that I consider fundamental for those who want to invest on cryptocurrency, analyze before buying it. Always choose the right cryptocurrency that suites your needs.
Check for crypto that solves a real problem
What was the big problem bitcoin solved?
In fact, they were two: transferring values quickly and cheaply, and the absence of a reserve of value that could be under the control of its owner in a safe and low cost. Two real problems solved by a single coin.
Before investing in any cryptocurrency, try asking yourself these four questions:
- What specific problem is this cryptocurrency trying to solve?
- In what cases will it be adopted?
- How big is the problem the solution is trying to address?
- Have others tried to solve the problem before?
The quality of the team behind the cryptocurrency
Just as when buying a stock it is necessary to evaluate the managers of the companies, evaluate the team behind the design of a cryptocurrency as well.
What is the curriculum of those involved in the project?
Are they really committed to making a quality cryptocurrency?
Is the cryptocurrency roadmap being followed and fulfilled on time?
Nothing is more important than examining and ensuring that there is a ” real deal ” behind the token. As the industry is relatively new and the regulatory and technological framework is not yet very clear, in cryptocurrencies, more than any other sector, it is fundamental to bet on the corridor instead of the horse.
In addition to a competent team, the mechanisms of distribution of the tokens need to be clear.
Bitcoin is a great example of this: each mined block distributes a fixed amount of bitcoins, which drops by half every 4 years. In addition, the supply of bitcoins is also known and fixed at 21 million coins. These rules are clear and accessible to everyone, from the oldest Holder to the new investors.
If the currency does not have these rules clearly stated, or has no limitation, be cautious.
Increase in demand
Just like the money supply, the demand for it is also important. After all, there is no point in possessing a useless cryptocurrency, which no one else wants to own.
By its utilities, the demand for bitcoins tends to be infinite. As your offer is limited, the price tends to rise. The same can be applied to Ethereum, due to its functionality in creating smart contracts. They are cryptocurrencies with high potential to be demanded in the future.
The greater the demand for a cryptocurrency, the greater the growth potential of its price.
Potential for institutional uses
Cryptocurrency such as bitcoin were, until recently, seen as tech-savvy nerds, or as cryptocurrency used in the world of crime.
Today, we have large funds and grants investing in cryptocurrency, even creating index funds based on them. This is a great way to attract investors with large sums of capital to invest (so-called institutional investors).
With more institutional investors in the market, the larger the value of that cryptocurrency tends to stay in the medium and long term.
Considering this possibility, another factor of great importance when evaluating a crypto is that it has the ability to handle the volume that such investments will require if it receives money from these sources. Not all cryptocurrency are scalable in this way. Some are designed to be small and so remain. Others can easily see billions of dollars being channeled into them, pushing the price to very high levels.
While making a fundamentalist analysis of a crypto-currency is not as easy as doing business, that does not mean that it is impossible.
The bitcoin itself can be analyzed on certain grounds. Through the website blockchain.info you can have access to several useful analysis tools: from hashpower, hashrate, currency price history, number of transactions, market value and several other useful metrics.
An investor who intends to buy a cryptocurrency should always check that the cryptocurrency in question has ways of disseminating similar data, either via its own website or through a whitepaper .