10 years ago, if you talked about Bitcoin and predicted its current price, literally no one would believe you, but today, we are living in a world where Bitcoin is accepted as a payment system in giant banks and its price has recorded a peak of more than $60,000.
Bitcoin and cryptocurrencies have become the modern world’s trend. In social media applications, in the news, on TV, and even in all supermarkets and stores and cafes, everyone is talking about them. The truth is that it’s very difficult not to get tempted to invest in these assets. But, if you are rushing to invest in cryptocurrencies just because of the hype that has surrounded the whole world, we beware you to wait!
We don’t mean to discourage you or change your decision, but we want to warn you that if you don’t gather enough knowledge, you may fail and lose your hard-earned money. In the world of cryptocurrencies, unrealistic optimism and prejudice certainly lead to failure.
In the ever-evolving world of cryptocurrencies, staying informed and making well-informed decisions is crucial. At Crypto Desk, we understand the importance of gathering knowledge and understanding the various factors that can impact your crypto investments. We are here to provide you with the guidance and resources you need to navigate the exciting but volatile crypto market.
In the present article, we have tried to explain 6 criteria that you’d better pay attention to before investing in cryptocurrencies. If you are a newcomer or you think you need more knowledge regarding these currencies, stay with us up to the end.
Size of community and market cap
Definitely one big criterion for assessing a cryptocurrency project is its market cap. Some people falsely assume that the price of the coin/token is important, but we recommend that you pay attention to the market cap rather than the price. In case you don’t know, the market cap refers to the total value of the circulating coins or the aggregate value of the cryptocurrency’s market.
As an example of a coin with a low price and a high market cap, we can refer to Cardano (ADA). Cardano at the time of writing is the eighth largest cryptocurrency by market cap, but the price of each ADA unit equals $1.21. Several valid websites exist that you can use to check a cryptocurrency’s market cap, among which we can refer to CoinMarketCap as the most famous one.
The reputation of the team
Another important criterion for assessing a project’s value is the reputation of its team. Check the developers’ social media accounts. Do they regularly post about the new updates or inform the community of the latest news? Are they anonymous? Do they have effective contact with their audience?
A project’s whitepaper is a very useful source for assessing the project and its possible future. A whitepaper is an initial article that explains everything about the project’s aims and includes all required technical details. A good whitepaper has to be as complete as possible. It must clarify the project’s exact aims and the challenges it wants to overcome. A project with no specific aim is of no worth, and a vague incomplete whitepaper is a sign of this.
Tockenomics is a new term belonging to the crypto space and it refers to a project’s plan for issuing its coins/tokens and preserving their value. You probably know that the value of an unbacked asset like a cryptocurrency is mainly determined by its supply and demand pattern. Too much supply with little demand leads to failure. Therefore, pay attention to the tockenomics of the project and don’t undermine it.
The project’s investors and supporters
Maybe not as important as the previous ones, but this factor also plays a key role in a project’s success. A good example may be Dogecoin. Dogecoin lacked many of the criteria we referred to in the previous parts, but it had the support of influential people like Elon Musk and Mark Cuban. Many people believe that this was the only reason for Dogecoin’s unpredictable success and its price increase. Don’t forget that these people have both money and fame, so they can be super influential.
The price history
The last but not least important criterion is the coin’s price history. If a cryptocurrency’s price is too near to its historic peak and you are about to buy it, don’t forget that the price may decrease and you may suffer a loss. Of course, this is not true about all cryptocurrencies and all situations, but it’s a factor you’d better have in mind.