Rumours of cryptocurrency’s death are greatly exaggerated.
The virtual token market is going through a sharp correction this year, with some digital coins in a bear market. But this does not mean that crypto is experiencing its demise.
In fact, like the equities' arena, if prices are going down, and you are confident in a particular asset’s future, this is a tremendous buying opportunity, be it Bitcoin or Cardano. Indeed, there are many cryptos to choose from with the right due diligence.
But how do you even know if a specific cryptocurrency is worth investing in right now? We have compiled a brief guide of five ways to determine if you should generate a position in a token.
1. Utility
Cryptocurrencies are meant to solve problems, improve a service, or create value for holders.
The $1.7 trillion industry comprises thousands of protocols and digital currencies. Unfortunately, most of them do not accomplish anything except functioning as pump-and-dump schemes.
It is hard to believe that CatCoin and Run Doge will enhance the crypto community or the financial sector in any meaningful way in the future.
Put simply, the best way to invest in crypto is by finding out what its utility is. Solana was designed to facilitate decentralized app (DApp) creation to enhance decentralized finance (DeFi) solutions. Tether is meant to serve as a hedge against risk and speculation in the crypto realm.
What does your crypto do?
2. Transparent Development
Before you hit the “Buy” button on a digital currency you have been eyeing; it is critical to peruse the protocol white paper authored by the coin creators. The white paper should provide plenty of information, from the development process to its long-term objectives, filled with analysis, data, and current finances.
In other words, the entire project needs to be transparent, from the first coin issued to the broad array of updates during the token’lifespan.
The more you know about the cryptocurrency, the less chance of being fleeced by the pump-and-dump grifters.
3. Not a Meme
In 2020 and 2021, the entire cryptocurrency industry fell victim to the meme coin craze. People made a ton of money in a short period and left latecomers holding the bag and stewing in losses.
SquidCoin was created in the aftermath of the show Squid Game’s popularity. Everyone lost their money.
ShibaCoin became immensely popular because the digital token has skyrocketed 300 percent in one day. Many people are hoping for it to touch a penny, but it is unlikely with more than 37 trillion coins in circulation.
Grimace Coin soared because of a couple of tweets. All the hype vanished after it escaped the headlines.
Dogelon Mars3ELON – well, the name says it all!
Essentially, these meme coins serve no other purpose than to make early adopters a lot of money in a couple of minutes. They do not possess any utility.
Before you ask about Dogecoin, it should be noted that it fosters micropayments. This could become a huge digital currency in the future if Elon Musk’s takeover of Twitter is successful beyond merely purchasing it.
Suffice it to say; you want to buy and hold cryptocurrencies that are not memes. Or, if you need to partake in the meme coin FOMO, you should wait until the price crashes, and then you can buy close to the bottom.
4. Deflationary
What makes Bitcoin, Ripple, and Cardano attractive is that they are deflationary digital currencies because there is only a certain amount that will ever be created and issued.
For example, in the world of Bitcoin, only 21 million coins will be created. This makes Bitcoins hot commodities!
Indeed, this is not the only factor you should be paying attention to since most cryptocurrencies do not have a maximum limit, but it could be another layer to add to your extensive research.
5. What Other Crypto Investors Think
The cryptocurrency industry is immense and enthusiastic. You could visit online boards, poke around on Reddit, or read market analysts’thoughts on the latest developments in specific coins or the broader ecosystem. Let’s be honest: There will always be others who will have more knowledge than you in this area, so it can help you determine the efficacy of coins and how they will perform in the future.
6. Do You Believe In It?
For the most part, you will buy a stock because you believe in the company’s products, finances, and long-term trajectories. The same idea should apply to cryptocurrencies.
You may believe in the future of smart contracts, so why not buy a stake in Cardano? You support the goal of DeFi, so why not acquire a position in UniSwap?
During the height of the crypto craze, many traders rejected fundamental analysis in favour of hype. This led to enormous losses.
Think about what legendary billionaire investor Warren Buffett stated: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.”
Conclusion
To survive cryptocurrency, especially now that it is evolving into a much more mature marketplace, you need to treat buying, selling, and holding like conventional investing.
One way to achieve this is through diversification.
A diversified portfolio can most certainly help you endure the onslaught of volatility – and chaos! – in this environment. A nest egg of three to five cryptocurrencies is a great way to begin a diversified portfolio. Ethereum, Tether, Dogecoin, Litecoin, and Filecoin could encompass anyone’s list of protocols and tokens to provide exceptional capital gains in the future.
Of course, everyone will have a different approach to cryptocurrency investing. As long as you are not hopping on bandwagons, falling for the hype, buying on FOMO, and looking to get rich – and quick – you will be able to successfully navigate the inevitable turbulence in the world of digital currencies.
Need help to get started? Here are some coins to consider in 2022:
· Bitcoin
· Ethereum
· Cardano
· Polygon
