The cryptocurrency market may not look very inviting right now. Its market value has dropped to less than $1 trillion after soaring past $3 trillion late last year, so before you invest in any cryptocurrencies, you must do due diligence to avoid stories that touch.
In this sort of situation, investors often flee risky investments and opt for the safest plays. That’s what has hurt cryptocurrency. Of course, cryptocurrency prices look tempting at these levels. So, you may be thinking about getting in on the market. Should you really do that right now? Let’s find out.
Currently, Cryptocurrency prices are fluctuating and dipping (like many crypto enthusiasts will say), and given the situation, people consider it wise to buy as many Cryptocurrencies as possible in order to take advantage of the dip to make wealth.
The idea is to buy these Cryptocurrencies now that their prices are low and then sell them when their prices increase.
However, it is dangerous to trade Cryptocurrencies without adequate information as there are unscrupulous traders or organizations out there waiting like hungry lions to bank on your ignorance.
So, it is crucial to make research and be adequately informed before buying any currency out there in the Crypto market. In the crypto world, traders are often advised to make research themselves to avoid telling stories that scratch the buttocks after investing big bucks into any digital coin.
We know how frustrating and painful it can be to lose money, and we have taken the time to make a list of the things you must research or check before investing a penny in any coin out there.
Trust me, making this research will go a long way in saving you from headaches, high blood pressure, and other aches that happens whenever the crypto market receives a Big Blow.
what to look out for when buying cryptocurrency
These five things listed and talked about below will simply serve as indicators to give you a clue of what the future of any Cryptocurrency will look like.
This is to help you make sound investment decisions because trading Cryptocurrencies is not different from other normal businesses out there.
Perhaps, the only difference may be that Crypto is online and completely digital, just the same way you searched for the features of your smartphone on Google before buying it, you should equally make research about any digital currency before purchasing it.
Below we coherently listed the major things you need to look out for before investing in any cryptocurrency.
1. Total Supply, Circulating Supply, and Market Capitalization.
2. Exchanges listing the digital currency.
4. The Community
5. Development Activity
In the preceding paragraphs, we would give you clear explanations of these five listed terms above.
1. Total Supply, Market Capitalization, Circulating Supply
In the world of cryptocurrencies, when we talk about total supply we mean the maximum amount of a particular coin that can be available in the market even if the world is collapsing. For instance; the amount of Bitcoin that can be in the Crypto market now is limited to 21 Million.
If the total amount of Bitcoin in the market becomes 21 Million tomorrow morning, the supply of the coin will cease. Although, there is a chance that the protocol behind Bitcoin will be changed to make room for a larger supply of the coin.
Secondly, if you want to get the Market Capitalization of a digital currency, you have got to check for the circulating supply of the currency and multiply it by the current price of the coin.
Using Bitcoin as an example; the circulating supply is about 18.6 Million and the current price of Bitcoin in dollars is $37, 672. So, 18.6 Million X $37,672 dollars gives you the Market Capitalization. In other words, the Market Capitalization of a cryptocurrency is simply the Circulating Supply multiplied by the current price.
Knowing all of these comes with an advantage on the side of an investor because it gives a blueprint on the workability of the project behind any cryptocurrency anywhere in the world and subsequently, points out the potential risk that exists with trading any digital coin.
For instance, it is a known fact that the total amount of a coin in circulation can greatly impact the market value of a coin. It is important to note that if a crypto project shows a total Market Capitalization that is influenced by a crazy supply of coins, then watch your back while dealing with that particular coin as this is a RED sign.
You should also make efforts to research how a cryptocurrency was originally distributed, you can find this using the whitepaper which we would discuss later in this article.
Using the whitepaper, you should check the amount of that particular coin pre-mined by the team behind the cryptocurrency project. Should in case you find out that a crazy large amount of the coin you want to invest in is owned by a few persons/parties or kept by the team behind the coin, don’t invest in the coin because things could go the wrong way pretty soon.
2. Exchanges listing the Currency
One of the ways to find out a useful coin in the Market is to check the platform of credible Exchanges for the coin. If you don’t find the coin on the biggest Exchanges in the Market, then It means that you have got to trade with caution as a good investor.
Somethings these big Exchanges may have some of these shitty coins in their disposal or list. But the truth is that those shitty coins or risky coins will be removed after a while.
So have this at the back of your mind if you don’t find a coin on credible Exchanges and Peer-to-peer platforms, you should make more research before putting in your money to avoid stories that scratch the buttocks or armpit. Examples of good Exchanges include; Binance, Coinbase, Kraken, Bitstamp e.t.c
Just so you know, a whitepaper is just a kind of report which contains relevant details and in-depth information about a Cryptocurrency project. All good investors are expected to go through the whitepaper of any cryptocurrency to gain great insight into its project.
Note that any good whitepaper must contain the following;
a The roadmap for new features.
b. The amount of the coin pre-mined as we mentioned in number one.
c. Defined goals
d. Generally, the supply and distribution of cryptocurrency. e.t.c It is imperative to note that the contents of a whitepaper go beyond these four(4) things listed above.
Before Investing in any cryptocurrency, relax, don’t be desperate, and calmly read the whitepaper. The world is out to steal from you man! Don’t let that happen, stay calm and acquire all the knowledge your need before investing in any coin, to avoid regrets. Before Investing, you must read the whitepaper of the project.
The whitepaper will help you decide if the project is good enough for your money or show you if the project is just a White-Elephant-Project invented by scammers who sound too good to be truthful. If you find any deficiencies after going through the whitepaper of any cryptocurrency project, don’t invest your money.
4. The Community
As long as cryptocurrency is concerned, one of the things you must check before investing your money into any cryptocurrency is its Community.
The essence of a powerful Community on a coin cannot be over-emphasized. The bigger the community, the more valuable the coin and project gain. Going through the community will give you a reasonable amount of information on what other investors have to say about the coin and this will go a long way to help determine whether you should invest or not.
Even though it’s not a good idea to follow the crowd, you must make your own personal research. But, any crypto project commanding honest concern from a large number of people possibly has the potential to grow into something gigantic in the future.
Yes, you should make your research, but consider the community before choosing to invest in any cryptocurrency in the future. Go to their Twitter handles, other social media platforms, and cryptocurrency forums to read the opinion of other people about the coin.
Take a close look at the number of followers across their social media handles and note whether their followers are enthusiastic about the Crypto project or not. This will help you to pass good judgment about the coin.
5. Development Activity
Before investing in any coin, another thing a good investor should check thoroughly is the Development Activity of the digital coin or cryptocurrency in question.
There are certain coins without any Development Activity for a very long while, but you would still see people blindly investing in them. For what? The reason is what I cannot tell. Probably, these cryptocurrency enthusiasts made little or no effort in checking the Development Activity of these digital coins before putting in their money.
Regular Development Activities is a green sign and shows that the group backing up the project is doing something from time to time to promote the project and make it a lot better, and of course, are doing their best to make progress happen.
You can check for the project Development Activity on GitHub and see things for yourself. On GitHub you will be given the privilege to see the following;
a. Recent updates and how soon they come.
b. The project Activity Metrics.
c. Fixed issues and the response rate when difficult challenges show up.
d. The rating and the total number of stars given to the coin by the public.
All these and many more would give you great insight and fortify you with the things you need in order to make your investment decisions. When you check and discover that the coin has had no Development Activity in a very long while, let’s say 9-20 Months, be careful with how you throw big bucks in the Market for that particular coin.
Knowledge is power and gives you freedom and security. The outside world is waiting patiently like a leopard to bank on your ignorance, and this is only possible if you conspicuously choose to remain ignorant and play blind games when making investments or business negotiations.
There is enough knowledge on the internet to help you make good decisions and take the right steps.
Don’t be too desperate for money to make the mistake of investing in what you don’t understand. Always make good research before putting money into anything.
This rule is applicable to any kind of business whether it depends on the internet or not.