New To Crypto? Learn How To Analyze A Cryptocurrency to Avoid Losing Money

Many seasoned people had lost significant amount of money when they began investing, due to the lack of information on how to choose the best projects and how it works. Well, luckily for you, this information is no longer private and now you can learn to choose the best cryptocurrencies to put your money on, and avoid big losses with bad projects, just following these simple but effective points.

• What people are talking about the cryptocurrency?

Everyday, there are tons of new cryptocurrencies being created with new promises to change the market as we know it. Not to mention that most of these projects will never leave the drawing board. Some of them might have an initial pump and then it has a cruel dump, right after the first investors sell the assets they bought on the pre-sale, making a lot of people lose a lot of money. So, how to avoid to be catch on the lust of the “FOMO”(Fear Of Missing Out) and wasting money getting one of the famous “shitcoins” (cryptocurrencies with silly project, such as memecoins)?

Well, the first lesson to be learned is, see what people are talking about that asset. The best way for doing so is accessing their description on websites like Coin Market Cap (www.coinmarketcap.com) or Coin Gecko (www.coingecko.com). There, you can follow the news and comments about the cryptocurrencies, and then understand better the proposal and the critics about them.  

Having said that, we follow to the next step.

(The pictures used in this article are just for literacy matter. The cryptocurrency presented on the picture is not an investment advice)

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• Market Capitalization

Most of the time, new investors tend to go for the trends, position and/or price when choosing the cryptocurrency, they are going to invest. As it happens, there are great cryptocurrencies, with solid ideas but in their beginning.  So, they are not in the top list or with a high price. (Usually, it’s easier to a coin that costs $0.0001 reaches $0.10 than one with the price of $10.000 reaches $100.000).  Then, instead, use market cap as your first indicator.

“Market Cap - Current Price x Circulating Supply

For example, if each unit of a cryptocurrency is being traded at $10.00, and the circulating supply is equal to 50,000,000 coins, the market capitalization for this cryptocurrency would be $500,000,000"

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• 24 Hour Trading Volume

Why is it so important? Well, let’s pretend you buy a new ingredient for your restaurant in advance. However, all of sudden, everybody loses interest in that ingredient. Now you can’t use it neither sell it, it’s going to spoil in your pantry for the rest of eternity! Well, not exactly for an ingredient, you just throw it away, but for cryptocurrencies it’s what happens. Being aware of the “24h Trading Vol” will assure you have an asset that can be exchanged anytime you want or need! In short, besides having a good market cap, it’s extremely important to have a good volume/liquidity, both of these indicators must be coherent.

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• Take a look at the cryptocurrency “mission”

Cryptocurrencies are just like some companies on the stock market. They have a project, a mission, and as more they keep working to make the project come true, more valuable they are. Having that in mind, choose realistic projects, solid ideas and trustworthy developers. Great projects come with great people working on it. People who are not afraid to show up and have a good reputation to keep. Being aware of the team of a project will save you a lot of time and aspirin.

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• Exchanges

There is a huge list of cryptocurrency’s exchanges websites nowadays. As you choose which cryptocurrency you’re buying, you have to rely on trustful exchanges. Some exchanges, such as Binance or MECX for instance, will do great part of your research for you. They usually have strict requirement for listing a cryptocurrency. Thus, if the asset you are buying is listed on reliable exchanges, it gives you more safety and comfort to invest.

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• Verify if the currency has an active community

Last but not least, keep in touch with the community. As the developers as the investors must be active! Wheater they are talking about the project or showing the results, you must be aware what’s going on. Follow the developers and the project on the social medias, doing that will help you to know the right moment to buy or sell an asset.

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Investing on cryptocurrencies is not always easy. You must keep track of the news, the projects and developers. However, if you follow the tips above and keep studying, the rewards are worth it!

Thank you for reading, I hope I have helped you!

Evan Oliveira – New Investor Channel