Looking for new cryptocurrency investments in 2020? In this article, we will explain how you can pick the right digital currency to invest by following five simple steps. You can apply those steps to both short and long term investments. While these rules do not automatically guarantee success, but they will reduce your risk and also give you a clear vision of your crypto investment.
Five Rules On How To Find New Cryptocurrency Investment
Rule 1– Read the White Paper
First of all, you need to read the white paper of the new cryptocurrency you want to. Every single crypto out there has a white paper that explains what the team behind it is aiming to do and how and when they intend to execute it. It is very important for you to find out the problem they set out to solve, the solution they have figured out, and their road map. All those are the basics that you need to know when finding a new cryptocurrency investment.
Rule 2– Market Capitalization and Price
You need to check the market capitalization of the new cryptocurrency or in other words, the circulating supply of the coin as well as its price. You also need to exercise caution on your calculations. The reason is that some coins have partially circulating coins rather than the full tradable amount. Of course, that can have an impact on the future price of the coin since more coins will emerge in the market over time.
Moreover, the price is nothing else than an indicator of perceived value. Hence, the price of the cryptocurrency should never be the deciding factor behind the investment. The important factors to consider are the technical and future potential of the coin. If you are a new crypto investor, you might be tempted to buy the coin at a low price. However, you do not need to base your decision only on that because market capitalization can present you with an inflated price.
If a cryptocurrency has a high market capitalization but low daily volume, you’re most likely seeing the price manipulation that is usually referred to as pump and dump.
Rule 3– Coin Liquidity and Volume
Checking the liquidity and the volume of the new cryptocurrency is also essential. Find out the trading volume of the coin in the last 24hours. At coinmarketcap.com, for example, this expressed both in United States dollars and Bitcoin. A higher 24hour volume indicates that a cryptocurrency is more established with a solid base and is perceived value by the trading community. When choosing s new crypto, pick the one with at least 10 million dollars trading volume. This is an indication that the cryptocurrency has been traded and there’s quite a percentage of the users that trust that coin.
Rule 4– Developer Activity
Another important thing to do is to check the developer’s activity. The truth is that anybody that knows how to code is capable of designing their own digital currency. Unfortunately, this has resulted in a lot of cryptocurrency scams. So if a developer is launching a new crypto, he should have a history behind him. The reason is that nobody will join a new cryptocurrency if you are new to the network.
What is more, you should also look out for regularity. There should be constant updates about the cryptocurrency and new features being added to the coin on a regular basis. Of course, if the developer truly believes in the new cryptocurrency, he will make himself available to answer questions and respond to comments.
Rule 5– Social Media Presence
The social presence of the new cryptocurrency you want to invest in is very important. Whether you are looking to invest in the short or long term, their social media (Facebook, Twitter, Telegram, etc) need to have a good base of supporters. A cryptocurrency that has strong support stands the chance of succeeding in the market.