Wanting to invest of cryptocurrency because of the hype and don’t know where to start? You are in the right place, so keep on reading.
This article will cover what cryoptocurrency is and how can you determine which cryptocurrencies align with your investing style?
What is a cryptocurrency?
As defined by investopedia,
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
This is a lot to take but let us get the key takeaways.
Cryptocurrencies are digital assets. They don’t exist on a physical sense like your phone or dollar or anything you can hold. They simply exist as a digital entry.
Think about your bank account. In your bank account you have a number that represent how much dollar you may have. Cryptocurrencies is something like this but a little bit different. It is the same in the sense that is has some value that even your dollars in your bank account can have value even if you are not holding them physically. That’s kind of the same concept with a cryptocurrency. It’s a digital asset but unlike dollars you can’t go to the bank and pull out one physical cryptocurreny because it doesn’t physically exist.
Closely related above, cryptocurrencies are stored differently than traditional assets. When you store a cryptocurrecny, you have to do so through something known as cryptocurrency wallet. You can’t send your cryptocurrency to a bank. You need a dedicated cryptocurrency wallet.
How to determine what is a good cryptocurrency or bad cryptocurrency?
In the cryptocurrency space you should always be very careful. Because lots of people will try to give you information to help themselves. For example, I have crypto X (made up crypto) and some new beginners coming in and they asked me what they should invest in? If I tell them they should go invest with crypto X, they’re going to start buying it which is going to push the price up which is going to help me. So you really have to be careful who you listen to and on what articles you read because a lot of people will be trying to push their specific cryptocurrency
I recommend coin gecko when looking for a good coin. Coin gecko is a site that’s free to use and has a lot of great information and resources. They are also an independent website and they are not trying to sell you anything. They are just giving you information and letting you make your own decision.
So if you hear a new cryptocurrency or someone tells you to go check it out, coingecko would be the first place I would start because as I have said above, they are not pushing anything to you.
How to determine what cryptocurrency you wanted to invest in?
There are something to consider first when investing on a cryptocurrency. These are follows:
1. The Price
For example, you look at the price of Bitcoin at around 45000 dollars and you think you can’t buy one. That is perfectly fine because you can buy fraction of it. You can start with 50 dollars or hundred dollars, you can buy small portion of bitcoin. You don’t have to buy the whole thing.
So while the price is important, don’t necessarily think that because the price is 45000 dollars you can’t afford it because it’s possible to still purchase a small amount of cryptocurrency.
2. 24-hour Trading Volume
The 24-hour trading volume is how much people have been trading that cryptocurrency back and forth. So, a higher trading volume means that more people are buying, more people are selling and the reason this is important is because when you are a new investor, you don’t want to invest on a cryptocurrency that doesn’t have lots of people trading it.
For example, I gave you the Crypto X, and no one wants to buy it, you can’t sell it and you can’t buy more – there is no trading volume. So the higher trading volume which we refer as liquidity, the more liquid your asset is the easier that you’re going to be able to buy and sell that asset.
3. Circulating Supply
It is the amount of a crypto that is available on the market. The reason why it is important is because when you’re investing in a new cryptocurrency and the circulating supply is only 1 million but there is 1 billion that are going to be released, you know that there’s a lot more going to be coming on the market – basic supply and demand tells us that as they increase the supply of that token, it’s likely that the price will go down. So you always want to check on this figures.
Some cryptocurrency will have infinite supply, meaning there is no limit to the amount of cryptocurrency that can be created.
4. The fundamentals of the coin
As a new investor, you need to understand the fundamentals of why you believe the coin is going up.
Final words
When trying to invest on a cryptocurrency, you should always do your own research. Look for facts and figures not just on speculation.