Learn Tokenomics to invest in cryptocurrencies
Many people when studying a cryptocurrency look at whether they have the best team and the best technology. Even if this is the case, if their tokenomics are weak the project probably will fail.
In this post I will explain some concepts used to study a cryptocurrency.
Market Cap
It is the total market value of a cryptocurrency's circulating supply.
Market Cap = Current Price x Circulating Supply.
Instead of looking at the price I recommend looking at its market cap. With this value you can estimate how high a cryptocurrency can go. You can compare the market cap of a new cryptocurrency with that of major cryptocurrencies such as Bitcoin and Ethereum to make an estimate.
Max Supply
If a cryptocurrency has a defined max supply it is usually valuable and scarce. We also have deflationary cryptocurrencies, which will drive the price up in the future. However, the price of a cryptocurrency depends to a large extent on its market demand.
Token Distribution
If initial investors hold a large percentage of the token, there is likely to be dumping when the cryptocurrency is released to the public. The more decentralised the cryptocurrency the better.
Private sale prices
It is very important to pay attention to internal sales prices. If the internal selling price is much lower than it will be when it goes to market, then the price is likely to go down.
Utility
Finally, you have to understand that it is important to see that the cryptocurrency has a useful value and is not merely speculative. The more value it brings to a community the better.
