January 1st, 2018
5 Things to Check Before Buying Any Cryptocurrency
As a new investor, there’s a ton of things to learn about cryptocurrencies before you jump in with both feet. Taking the time to learn a little bit about your investments will save you from making some painful mistakes, but what information should you be looking for? In this article we’re going to go over the top five things you should investigate before you purchase a new investment.
The circulating supply
Many new investors will see an attractive project trading at a super low price and then think they’ve won the lottery. Unfortunately, they have likely forgotten to check the supply of the asset that they have invested in. When a coin or token has a supply in the billions, you can’t expect it to achieve Bitcoin level prices. If you’re looking for something that could have solid price appreciation, try to buy into something with a lower supply. If you need an idea about what that means, then take a look at the coins that are in the top market cap positions. Compare their supply to the asset that you’re considering purchasing. It’s of course not a guarantee of future value, but it will help you get a better grasp of how the supply and price relationship works.
What is the use case?
There are tons of ICOs out there shilling their shiny new token, but there’s just one problem. Many of these tokens have no reason to exist, they were issued purely to acquire funds for a startup. The project itself might very well be an amazing contribution to the crypto space, and it may go on to be very successful. Unfortunately, if the token doesn’t have any real use within that ecosystem, then you won’t see any of that lovely appreciation. When vetting new investments, you should be able to quickly establish what people are going to use that asset for. If you can’t then it might be best to move on.
Is this solution better than existing ones?
In many cases a project may seem solid, but what about the competition? Have you explored the other projects in this niche and seen what they have to offer? If not, then you really should before proceeding. Make sure to include solutions that are not blockchain related. If an easy to use solution to this problem exists without the need for anyone to purchase and utilize a strange token, then that project is already dead in the water.
Is there a marketing budget?
Investing in a community project is fun, but even these cryptocurrencies need a marketing budget established. Many times this comes from premines or a developer’s fund. Before you invest in any cryptocurrency, it would be wise to look for a well laid out plan on how the developers are planning to introduce this currency to the world. If there is no plan, then you should be worried about the future of your investment. This should include both an initial start up funds and plans for how they would fund continued development of the currency in the future.
Is there a community here?
Every cryptocurrency project big and small needs a community, and before you buy anything you should take a second to explore that. In most cases it’s easy to find them hanging out in various social media channels. Ideally you want to find a relatively large number of excited people sharing their views. If things are pretty quiet, then it might be cause for concern.
This is just a small sample of some of the things that you might want to investigate when choosing a new crypto investment. This is obviously a lot of work, and if you want to reduce your burden when doing your research then you could try utilizing a cryptocurrency analysis site like cointobuy.io
These sites will generally aggregate much of the information that you need in order to make informed decisions about your investments. While it won’t do all the work for you, it does provide a great start, and it will help you gather a lot of information on things like search trends and social interaction that would be difficult or impossible to gather on your own.