It’s a unique time to begin investing in cryptocurrency. Price fluctuations, constantly-emerging new varieties of coins, and an influx of investors curious about the potential of digital currency all indicate that interest has never been higher – nor has the investment landscape been more confusing. Here are eight tips to help you wade through the mire and begin intelligently investing in cryptocurrencies.
Tip #1: Pay Attention to Circulation Supply, Total Supply, and Market Cap
Looking at these three market factors can help paint a picture of a coin’s potential. Circulation supply and total supply go hand-in-hand, providing useful insights into the likelihood of a coin increasing in value over time – for example, the greater the number of coins and the faster they are brought into circulation, the harder it could be for a coin to climb in price. A massive total supply often indicates that prices will stabilize as circulation supply expands, as increased circulation offsets rising prices. Similarly, the market cap allows us to estimate future growth for coins – comparing market caps between various cryptocurrencies offers useful benchmarks to gauge a coin’s potential.
Tip #2: Diversify Your Portfolio
Diversification almost always makes for good investment strategy, period. But it’s especially true for cryptocurrency, where disruption is the name of the game – new technologies, mining algorithms, and more can pop-up out of nowhere, cause a stir, and disappear in the blink of an eye. Diversifying your investments with a range of market caps, target markets, and coin technologies can potentially reduce risk while providing diverse sources of return – in the spirit of insulating you from the more chaotic effects of the market.
Tip #3: Do Thorough Research
No one regrets doing some solid research before investing. When considering coins, evaluate the team behind them – it’s never been easier with LinkedIn, Facebook, and other social and professional networks. Who are the advisors? What about the investors? How much funding do they have, and how did they obtain it? These things will give you a picture of the health of a company, as well as a potential trajectory. Flash and hype are exciting, but a diverse team with strong experience, a proven track record of success, and backing from prominent VC firms or investors is far more likely to develop a successful coin.
Tip #4: Evaluate the Code
The public code repositories behind each cryptocurrency are a wealth of information for a crypto investor. Evaluating these repositories can tell us how often code is committed, the number (and severity) of any reported issues, how many developers are contributing commits, and more. Too few commits, or too few developers, usually means a coin is unsustainable. The code itself is also a useful source of information – clean, well-documented code is, at the minimum, a sign of competence. Bonus points if developers engage with the community via social media, speak at conferences, and more.
Tip #5: Read the Whitepaper Closely
The vision articulated in a whitepaper is a window into coin creators’ ambitions, but it shouldn’t be treated as the word of law. Whitepapers have a tendency towards grand language and ideas, which makes for exciting reading, but if a coin is trying to do everything or lacks details, it often portends a lack of technical know-how or a one-way ticket to dried-up funding. Look for whitepapers emphasizing a practical approach, as well as an understanding of cryptocurrency and the current technologies making up its foundation.
Tip #6: Gauge the Community Involvement
Like any product, coins need a community of purchasers, advocates, and users behind them to succeed – the greatest coin in the world on paper would be valueless without adoption. An active, engaged group of users, which you can gauge through social media and discussion boards, bodes well for a successful coin. It is an especially good sign when third parties begin building functions and integrations supporting a coin. A coin with a growing market cap should have a community growing alongside it – if market cap outstrips support, proceed with caution.
Tip #7: Assess the Hype Machine
We’ve been discouraging you from paying too much attention to hype, but don’t discount it entirely – it is often a byproduct of strong marketing, and strong marketing is key to a successful coin. That said, bells and whistles with no substance means that, as funding dwindles, so does the product’s opportunity for success. Product development and marketing working in lockstep is ideal, and organically successful marketing campaigns are also positive.
Tip #8: Watch the Timeline
Reasonable timelines and teams that deliver on them are good signs to an investor. This means a team is functioning well, reaching its objectives, and taking a realistic approach to their product’s development. Falling short of benchmarks is okay, but transparency is key – teams that provide an explanation for failure, as well as evidence to support it, are teams that take ownership of their process and want to be held accountable. Radio silence and constantly missed deadlines are big red flags.
Tip #9: Invest with the Help of Artificial Intelligence
If you’ve never unleashed the power of algorithms and AI for discovering patterns in the cryptocurrency markets before, perhaps it’s because it has never been available to retail investors in an easy-to-use format. Tickeron has created AI that can provide retail investors with technology and tools to enable trading with massive amounts of data and analysis. The end result is arming retail investors with a high-powered, virtual research assistant: Tickeron’s Artificial Intelligence.
Learn more about how the AI works by exploring the features of Tickeron’s Pattern Search Engine.