Bitcoin was the first cryptocurrency, launched way back in 2009. It is currently the world’s largest and most valued digital token and has been a great success, to say the least.
Bitcoin and its success inspired the inception of several cryptocurrencies over the past decade, and as recorded in August 2018, there are more than 1,600 cryptocurrencies active, and the number keeps on growing daily. This makes life quite difficult for a person who wants to put his first step in the crypto space, as so many options create confusion, especially for those who aren’t aware of the market thoroughly.
However, just like traditional investment instruments like equity and forex, cryptocurrencies also have a set of points which decide the fate of the particular token. Studying these points carefully can help an investor to pick the right coin with realistic expectations.
In continuation to our previous article, here we explore a few things that investors should look out for before investing in digital assets:
1. Study the History of the Coin
Find out who created the coin, how did it come into existence and when was it launched. Also, check the major events taken place in the ecosystem of that cryptocurrency since inception. Read about the price and stability of the token in the past six to twelve months. A good digital token is one which has been or less stable and has been growing steadily, with a minimum sign of extreme volatility.
2. Check for the Community Activities
Every digital currency has a community over social networking platforms like Twitter, YouTube, and several online forums. Usually, community trends play a big role in deciding the fate of any digital asset. See what people are saying about it, and look for people with whom you can discuss and understand the token better. Bigger the community, better are the chances that the digital currency will grow.
3. Read about the team behind the token
This is one of the most important parts of selecting a cryptocurrency for investment. A stronger team means that they are better equipped to fight any unusual or unwanted activities which might hurt the investors. Many a time, ex-employees of an existing token go on to create a new one.
For instance, co-founder of Ethereum quit the company and created Cardano. Similarly, Ethereum Classic came into being due to a difference of opinion between the management of Ethereum (ETH). Teams must have experience, knowledge, and skills to run a cryptocurrency ecosystem.
4. Check the adoption cases of the digital token
Cryptocurrencies came into being with the sole motto of providing an alternative to traditional money. However, large scale speculations had made mass adoption quite tricky, as prices of Bitcoins ran into thousands of dollars apiece.
Fortunately, digital tokens like Ripple (XRP), SwiftCash (SWIFT), Stellar (XLM), etc. have emerged on the crypto scene, which are entirely focused on adoption. This has pushed market expansion tremendously. See how the coin you want to invest in fares in this regard, as the better coin is bound to have a higher demand in the long run.