During last weeks we received several emails/messages regarding how and where to invest, so we decided to start this new section focused on Trading.
For now, we prefer to not go through giving trading signals (this function will be implemented in the future) but only giving you some tips and advice to choose where to invest your money.
Now let’s start. You are completely new to crypto trading and you have only FIAT currencies to invest. You studied a little, and now you know (more or less) what a cryptocurrency is and how it works. But where to start investing?
Often, at this point, investors act in three ways:
- Choose what to buy based on marketcap and start buying from the top of the chart (Bitcoin, Ethereum etc.)
- Choose completely random.
- Choose based price graphics, marketcap and project behind. Often these subjects have a traditional trading background.
What’s the right way?
None of the three options is completely right. Who choose the first and third way, generally think that project who rise during the past will rise forever. Like you can imagine, is not so simple, and often, projects who rise much during past days/weeks loose some a quite big portion of this gain, to then start rising again (or, in rare cases, go on losing and slowly die). Who choose the second way to invest think that cryptocurrencies are a strange casinò, and invests completely random. If this is your case I suggest you stop wasting your money, download PokerStars and play roulette.
So, how do you (we) choose if a coin can be a good investment for the future? There is not a “Gold Rule” or something, you have to STUDY (or paying someone else to do this).
These are the factors that can help us determinating if and how a coin is a good or bad investment. Please, take note that these are not good tips for ICOs: the ways to determinate if an ICO is legit are different and we will talk about it during next days.
- Age of the currency: if a currency is quite old, is for sure a safer (less risk) investment than a younger one. Keep in mind that in cryptocurrencies, “time is shorter” that normal finance: we can talk about “old coin” for every currency listed on a legit exchange for at least 6-12 months.
- The team behind the coin: every cryptocurrency is developed by a team of developers. The team can tell us a lot about the possible future of the coin. If the team is composed(or is supported) by reputable or well-known developers even a young project can be good as an investment. If the team is composed by unknown devs (or anonymous) we have to look at others aspects to determinate the value of the project.
- The purpose: every cryptocurrency is made to be a better solution to an existing problem. For example, Bitcoin was created to be an anonymous, fast, decentralized and safe alternative to FIAT currencies. Monero (XMR) was made for the same purpose, but with a focus on anonymity. Pay attention: we are not talking about what is the use of people do with coin, we are talking about what they were made for. Example: Ether (the coin of Ethereum Network) was developed to mainly pay fees of smart contracts (the MAIN INNOVATION of Ethereum), but at the moment it is used as fastest and cheapest alternative to bitcoin. What is the question that you have to keep in mind when looking at a coin’ Goal? Simply: “This purpose is valid and will attract new investors?”.
- The daily transactions: in my honest opinion, this is the most important aspect to look when you have to choose a new coin to buy. Remember, the daily price goes up and down for unknown reasons, but in long term most adopted and used coins will inevitably rise.
- Adoptions: this aspect is directly connected to point 4, but is a quite different. With “Adoption” we mean “how is developed the ecosystem that used the coin”. This coin has several applications/websites/companies that use it? Has it a user-friendly interface? Remember that big capitals come from normal people, so if a coin has a terminal-only wallet, or there is no easy way to spend/use it during daily life, or the project for what the coin is made is still not easy to use, it’s hard that this coin will be used from “mere mortals”. Example: Bitcoin has TONS of defects: it’s slow (only 300,000-350,000 transactions per day) and expensive (3-10$ per transaction) but during last years a very good ecosystem of services raised. Now you can easily buy Bitcoin with your Visa, and use it to purchase on Amazon. YOU have to determine if pros and more that cons.
- Efficiency: the coin do what it has to do in a fast, cheap, easy and safe way? Remember that cryptocurrencies are solutions for already existing problems (with others already existing solutions), so why I would choose to use a coin if there is another cheapest and safest way? Example: Golem Coin is the Coin of Golem Network (an Ethereum Tokens Network), and it’ll be used to purchase computer power online. Amazon does the same: sell computer power. And it’s Amazon. So you are sure that it will work smoothly and fastest as possible. And overall, everyone can buy power from Amazon in few seconds. Golem will be a good alternative if it will be able to offer a service that, in some aspects, is better than Amazon (faster? cheaper?).
For today is all, stay tuned for further tutorial about succesfully trading on cryptocurrencies!
— DISCLAIMER —
Cryptoeconomy.info is not a broker or else, and every suggestion/tips about investments IS ONLY AN OPINION. Invest only funds you can loose, and anyway never more than 50% of your total funds. YOU ARE THE ONLY RESPONSIBLE OF YOUR ACTIONS. Cryptoeconomy.info decline any liability arising from inappropriate use of the information published on this site.