Knowing which is the ideal crypto to invest our money is not an easy task. Today, I want to share some keys to keep in mind that will help you choose the best projects in this ecosystem.
When you decide to invest in cryptocurrencies it is normal for doubts to arise… And, choosing which crypto to invest in, is the big question of those who venture into this ecosystem.
It is likely that you have doubts regarding the support of each currency, what selection process to do to choose a good asset and even other more technical queries related to the platforms and wallets that you can use.
Right now there are more than 10,000 cryptocurrencies in the world and each one represents a different technological project.
Although all cryptos are usually treated as speculative financial assets, the truth is that behind each one there are development teams, communities, audit processes, alliances with companies, proposals, etc.
The first caveat I want to make here is that it is extremely important that we verify the information that these projects detail on their web pages.
Scams are the order of the day and this space is no stranger to them.
To combat them, we must learn to access reliable sources, get involved in the community, follow specialists, read specialized media publications and subscribe to services that provide useful information.
Fundamental analysis and technical analysis
Now, when analyzing a cryptocurrency we have two strategies to do so: fundamental analysis and technical analysis.
Importantly, both can complement each other.
Fundamental analysis is a technique used to be able to predict the future of a long-term asset, in this case cryptocurrencies.
To use this method, investors must take into account all the factors that will affect assets: macro and microeconomic variables, supply and demand aspects, and market behavior.
This method is not cost-effective for predicting short-term value, since these factors require time to show their effect on the market.
When it comes to crypto projects, the factors to consider are as follows:
● Market capitalization: market cap allows you to know the effective value of cryptocurrencies in circulation. It is obtained by multiplying the total number of coins in circulation by the quote price shown by the digital currency.
Ranking of cryptocurrencies by market capitalization.
Source: CoinGecko
● Development team: As in any company, the quality of the equipment is key in the crypto world. If its members give lectures, are active members in the crypto community and have been involved in similar projects we are facing a good development team.
● Development analysis: Another key aspect is the development itself. Pages like GitHub collect a project’s review history, so we can take a look at open source cryptos and, if we have the knowledge, check the quality of it.
● Active community: Crypto projects also come to life through community forums that offer a great opportunity to better understand the proposal and evaluate the point of view of potential investors.
Technical analysis, on the other hand, focuses on predicting the price movements of digital assets in the short term.
This involves using price charts to identify trends and patterns from which a prediction of the price of a crypto can be made.
Most crypto asset traders focus on technical analysis as it offers a better opportunity to make a quick buck.
Given the volatility that some currencies experience, this analysis is becoming the favorite discipline of those who want to make a profit in the market.
For technical analysis it is key that we set a strategy, determine the percentage of possible gains and losses and that we do not respond emotionally.
Brief crypto glossary
You should also know that in the crypto world you are going to find English terms that you probably do not know and that are very popular in this ecosystem.
That’s why I want to share with you a basic glossary with the most repeated words and phrases by crypto investors:
Fear, Uncertainty, and Doubt (FUD): Is a strategy that involves disseminating false or biased information about a competitor’s product or services to harm them.
Fear Of Missing Out (FOMO): The famous “fear of missing out” is a sense of anxiety you may feel when you don’t buy certain assets. FOMO can lead you to make wrong investment moves for fear of “missing the opportunity.”
HODL: term that was born from a typo, the original word is “hold” and in crypto means to buy and hold a crypto asset in your wallet for a long time.
SAFU: another term born from a typo. It comes from the English word “safe” and means that the funds are safe.
Return on Investment (ROI): This is a metric used to calculate how much we are gaining (or losing) from our investments.
All-Time High (ATH): the highest price ever recorded.
All-Time Low (ATL): the lowest price ever recorded.
Do Your Own Research (DYOR): These acronyms are used to summarize that we must do our own research, verify the information and contrast with different sources.
Due Diligence (DD): “Due diligence” is the investigation that one company or person is normally expected to do before entering into an agreement or contract with another.
Anti Money Laundering (AML): The term refers to laws and regulations that prevent criminals from laundering illegally obtained money.
Know Your Customer (KYC): the term “know your customer”, in Spanish refers to the identity verification process that some crypto platforms have implemented.
Finally, deciding which crypto to invest in will depend on the view that each investor has of each project and the risk they want to take.
It is still an extremely volatile market, with many possibilities of profit but also of losses.
Knowing how to identify the best opportunities, that is, those projects that could become the crypto giants of the future, and doing it before anyone else is what could really make a difference.
Still, I invite you to never forget: DYOR!
For the Daily Investor
Iñaki is an Argentine investor and educator with a specialization in emerging technologies from the University of Oxford. He spent more than a decade advising companies on product innovation. And for four years, Iñaki has been fully dedicated to the world of blockchain technology, the same one that supports most of the cryptocurrencies on the market.
