How To Pick the Right Cryptocurrency to Trade or Invest In

The really big opportunities come with trading or investing in cryptocurrency. Fluctuations in the market won’t affect your profit, but profit growth won’t be so impressive. Whether you plan to buy and sell cryptocurrency for short-term profit or invest for long-term gains, it’s completely up to you. Either way, you have to be persistent. Also, get crypto-savvy and learn how to spot the opportunities. Figure out the value of the purchase, and wait until the price is below what’s reasonable. Ignore the trends and stick to an objective way of determining whether or not it’s time to buy or sell. 

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Not all cryptocurrencies are created equal. The question now is: How do you know what digital asset is a smart choice? Check these factors before making a decision. 

Consider The Market Capitalization and The Token Supply 

Market capitalization allows you to understand the true value of the cryptocurrency. Use it to understand the full picture and compare value across cryptocurrencies. Market capitalization is calculated by multiplying the overall number of tokens in circulation with the current market price of that respective token. Digital assets with larger market capitalization make safer choices because they’re supported by established companies with longer history in business. Needless to say, more information is needed before making a trading/investment decision. Market capitalization more or less reflects the popularity of a coin. 

Understanding the total supply of the coin is helpful in terms of evaluating the cryptocurrency. The total supply refers to the total number of tokens that exist on the blockchain network, including the ones that aren’t in public circulation. See if there’s going to be a limited supply of a particular digital asset. For instance, by March 2022, more than 119 Ethereum tokens were issued and in active circulation. Attention should be paid to the fact that Ethereum has no maximum limit. Anything that isn’t scarce might command a good price. 

Look At the Price Movements 

Cryptocurrency prices change every day due to the supply and demand. If people want to buy a certain digital asset and then sell it, the price moves up. Alternatively, if more people want to sell a certain digital asset rather than buy it, the price goes down. Pay attention to the price movement of any coin. Bitcoin has the most influence over the value of other digital assets. Legacy cryptocurrencies, such as Ethereum, are a perfect fit for long-term holding. The arrival of Ethereum 2.0 is expected to optimize trading. 

In today’s economic climate, fiat currency is losing value against cryptocurrency. Convert your Ethereum to dollars and see for yourself. You can cash out on cryptocurrency like Ethereum quite easily. Before you do, make sure to check the Ethereum price USD. It will take a couple of days for the transaction to be completed. Many agree that crypto-to-crypto is the only way to trade. You can convert one digital asset to another to leverage market opportunities. For instance, you can convert Ethereum to Bitcoin so that you have both of them in your portfolio. 

Figure Out How Hard It Is to Buy the Cryptocurrency 

It’s not difficult to buy cryptocurrency on exchanges like Binance, which offer the option to register and buy in a couple of minutes. The only hurdle you can come across is scarcity. As supply diminishes, the demand for crypto assets increases. It’s a good idea to look at the daily, weekly, monthly, and yearly trading history of the cryptocurrency. Even minuscule fractions of cryptocurrency can be purchased. For example, if you don’t want to buy an entire Ethereum token (or you don’t have enough money in your account), you can buy a fraction of one. Almost all digital assets are divisible into fractions.

If a cryptocurrency is available on major exchanges that many people have access to, it may potentially increase in value. The easier it is to buy a digital asset, the more likely it is that it will benefit your investment portfolio. The cryptocurrency exchange might not list all the coins you’d like to acquire. What is more, some tokens aren’t available to US traders. If a crypto asset isn’t widely available, this doesn’t mean you should avoid it. The chances are that the currency is undervalued. The price perceived is less than its fair value, so it represents a buy opportunity. 

What Problem Does Cryptocurrency Solve? 

In the whitepaper, you’ll find the coin’s use cases. To understand if a cryptocurrency will have long-term value, see what problem/problems it solves. Generally speaking, virtual currency was created to allow people without stable banking systems to store wealth in a secure way, independent of the government. It’s the reason why cryptocurrency drives acceptance among users and investors alike. Dig deeper to uncover the value of the digital asset you’re interested in. As mentioned earlier, the whitepaper describes the needs, problems, solutions, and benefits to the users. The more details, the better. It clearly shows that the team has thought the project through. 

Blockchain technology is becoming relevant across different sectors. More and more businesses are implementing this technology into their operations. Some of the problems that cryptocurrency can solve are inflation, equality in money management, and cross-border transactions, to name a few. Let’s take a specific example. Ethereum enables smart contracts on its blockchain network, which streamline business and trade between anonymous and identified parties. Smart contracts solve the issue of trust in the digital world. Ethereum makes available a system that gives users more control over their data, not to mention that it allows applications to be built. 

Finally, yet importantly, see what options there are for storing the cryptocurrency. You can lose your digital assets because of theft, computer failure, or loss of access key. If you actively trade or invest in cryptocurrencies, its’ recommended to keep some of your coins at the exchange. When possible, hold your coins in cold storage. The tokens are stored offline all the time, meaning that it’s difficult, if not impossible, for malicious actors to access your funds. 

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