There is a growing interest in cryptocurrency despite the volatility of the market. The unprecedented gains investors have made in Bitcoin is what keeps drawing new investors in. But even then, investors get easily confused as to which cryptocurrency they should invest in because there are thousands of cryptocurrencies available with new ones constantly coming up. So how can you decide on what cryptocurrency to invest in?
Here are 5 questions to ask for deciding what cryptocurrency to invest in:
What problem does the project solve?
What makes Bitcoin and other coins like Ethereum and Litecoin popular is the fact that they are actually solving a real problem. There are hundreds of coins that merely transfer protocols with no real-life application. When investing, look for coins that were designed to solve a specific problem and for some practical examples of how that is happening.
What is the community saying?
Knowing what other investors are saying is a great way of determining how many other investors believe in the project. The only caution with this is you shouldn’t listen to people who are not investors in cryptocurrencies because they will give you misguided opinions. Look for other user opinions on Reddit as well as popular cryptocurrency forums.
Who is behind the project?
Do not invest in a cryptocurrency before doing a background check on the people behind the project. What you want to establish is if the team is composed of competent and experienced professionals in the blockchain technology. Check out the social media profiles of the team members and especially their LinkedIn profiles just to be sure they have the valid credentials.
Have any partnerships been formed?
Every serious company seeks to form partnerships with like-minded individuals. On the other hand, established companies would never agree to partner with an upcoming company unless they see financial value in the partnership. if you find a cryptocurrency that has partnered with an established and renown company, it is an indication that investing in the crypto will yield you good results.
What is the supply vs demand like?
The law of supply and demand also works in the cryptocurrency world and is a key element for deciding on what cryptocurrency to invest in. If the supply of the tokens is higher than their demand, the prices will drop. But if the demand grows faster than the supply, then the prices will automatically go up. Take some time to research on the supply and demand dynamics of a cryptocurrency before investing in it.
Cryptocurrency has elicited mixed reactions from mainstream media. While some hail it as the most revolutionary technology of this century, others warn investors to stay away. So if you want to invest in cryptocurrency, do not base your decision on the news. This might confuse you even further. Rather, ask yourself the five questions above for deciding on what cryptocurrency to invest in and make an informed decision.