How to evaluate cryptocurrency
In the period of cryptocurrency price growth, no one can make a mistake and make bad investments. This is how to bet and not lose.
However, when the course is in decline, investing is not easy. In the process of collecting coins, you should not act at random, especially if you want to consistently make money on cryptocurrency.
You have to do more than just throw darts like in the Darts game.
Finding a decent cryptocurrency from a variety of questionable coins is not such a difficult task. To make an informed investment decision, you need to learn how to ask the right questions.
Just follow the recommendations below on how to correctly evaluate cryptocurrencies, and learn to predict which investments will bring maximum profit.
In essence, blockchain projects are technology startups. Each of them consists of a team trying to solve a specific problem.
When you buy a coin, you are not just buying cryptographic icons 1s and 0s, which someday will magically increase in value.
By investing, you support the idea and the team that will implement it. A good idea and practical option for using blockchain is the key to the growth of the value of coins.
What problems do they solve
Blockchain projects solve technical problems. Bitcoin, for example, saves value on an immutable registry, thus reliably protecting your money.
Ethereum simplifies the establishment of digital agreements without intermediaries. Monero creates anonymous, secure peer-to-peer asset transfers.
There are many other blockchain projects on the market. You may have heard about cryptocotics – the modern version of Tamogochi’s pet for the blockchain.
Digital cats are literally tokens. This may sound silly, but virtual pets owe their success to legendary Pokémon.
In fact, this is a kind of business model that flourished in the old days when technologies were not yet so developed, and now it, this technology, was implemented on the blockchain.
The idea that you need to study what has been done before may seem strange, but when it comes to assessing the prospects of a coin, it cannot be called bad.
Blockchain offers inherent benefits. The security of information and the responsibility of the parties only add value to an existing idea.
Ripple uses its own token, XRP, to make transfers between financial institutions.
This idea is not new. As long as financial institutions exist, remittances will also exist.
At the same time, a trusted third party will transfer funds to banks and charge their interest for its implementation.
Ripple gets rid of mediation and reduces its percentage to a minimum – even the minimum commission fee matters when it comes to a potential multi-trillion industry.
Who is behind the project
The product should be as good as the team that created it. Ideas are always new and technically sophisticated, so people whose cryptocurrency you buy know better what they are doing.
The team of the new blockchain project must provide complete and accessible information about themselves on their website. Check the history of the team and make sure that they select the best specialists for their project.
If the team is made up entirely of graduates from the Massachusetts Institute of Technology, this could be a problem.
Some older, more established projects have not just teams, but entire large communities.
Cryptocurrency is, first of all, decentralization, as well as many groups that build cryptocurrency projects.
Look at their Reddit, Twitter, or Telegram channels to see who is involved in the project. Look at all the positive feedback from the team and see if there are any serious sponsors for the project.
In addition, if decentralization is an idea that you believe in, then cryptocurrencies whose teams adhere to the principles of decentralization should be of more interest to you.
Another indicator of the strength of the project is those who support it. While smart strategic partners can influence a project, they also give it stability.
For example, the NEO project works with the Chinese government. If the government of the largest country and the most developed economy on the planet believes in a product, this can give it additional value.
What does the coin do
It may seem that these coins are just markers and market capitalization, but they also serve a specific purpose.
Some coins provide market liquidity, some can be used to purchase / pay for other services, others act as securities, and the rest, basically, are just membership cards.
Coins, such as Bitcoin or Dash, have really wide options for use – claiming, respectively, for the title of gold reserve and cash method of calculation in the world of cryptocurrencies.
Ether and NEO’s GAS are forms of payment in their own ecosystems of decentralized applications. Other tokens have even more specific uses.
Golem allows users to rent unused hard disk space on a computer and charge a fee for this service with project tokens.
This may be one use case, but the value of the coin is obvious.
With other coins is not so simple.
EOS, which currently ranks 6th in market capitalization, is a decentralized application platform that has its own token, but judging by their website, “EOS tokens do not have any rights, methods of application, purpose, attributes, functions or Characteristics, whether explicit or hidden, including, without limitation, any use, purpose, attributes, functions or characteristics on the EOS platform. ”
Some believe that this language is only in the contract, to remove any responsibility from EOS. This is what you should pay attention to when evaluating a particular cryptocurrency.
Another example is the Ripple XRP token. As discussed, this token provides liquidity to bank transfers on the Ripple network.
So then what will be the user scenario if you are not a large financial institution?
We will answer: the scenario may not be very wide. But if you think that banks will massively accept Ripple tokens, and its demand will increase sharply, then buying tokens now at a low price and selling the bank later can be profitable.
However, if all of a sudden everyone starts buying Ripple, and there are not enough coins to work in financial institutions, then a problem may arise.
The coin that you intend to buy during the initial coin placement can be developed by geniuses who offer an amazing and useful product, but if the coin cannot be used in any user scenario, you should think twice before buying it.
Grading a coin is a subjective thing. You can consider hundreds of factors and still make mistakes. But by asking yourself the questions outlined in this article, you will certainly take the right path.
The next time you want to buy cryptocurrency, try to find out what you are buying.
Knowing what the coin is used for and who created it, you will receive most of the information necessary to make an informed decision.