In this post, I’ll tell you steps to take to find the right cryptocurrency to invest in at any season. I’m going to be explanatory and not speak gibberish, so let’s dive in.
Meaning of Cryptocurrency: Like I explained in this post, A cryptocurrency is a medium of exchange like normal currencies such as USD but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. If that wasn’t so straight to the point for you then take this one instead, it is a digital currency designed to work as a medium of exchange using encryption techniques to secure transactions and creation of additional units of the currency. A lot better right?
3 things to look out for before Investing in any Cryptocurrency
Here are the main features of any cryptocurrency you should consider;
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1. Market Capitalization and Daily Trading Volume
A cryptocurrency’s market capitalization is the total worth of all coins currently in circulation. A high market capitalization can indicate a high value per coin or simply a lot of available coins. Perhaps more important than market capitalization is daily trading volume: the value of the coins that exchange hands every day. A high daily trading volume relative to the market capitalization indicates a healthy economy with many transactions.
2. Verification Method
One of the major differences between cryptocurrencies is their verification method. The oldest and most common method is called proof of work. To gain the right to verify a transaction, a computer has to expend time and energy solving a difficult math problem. The trouble with this method is that it requires a massive amount of energy to operate. Proof-of-stake systems attempt to solve this problem by letting the users with the largest share of the currency verify the transactions. These systems require less processing power to operate and claim faster transaction speeds, but concern over security means that few coins use an entirely proof-of-stake-based system.
3. Retailer Acceptance
A cryptocurrency isn’t of much use if you can’t buy anything with it. That’s why it’s important to know who accepts a currency before you invest in it. A few cryptocurrencies are widely accepted, even boasting partnerships with major retailers. Most, however, have more limited acceptance, and some can only be exchanged for other cryptocurrencies. Some coins simply aren’t designed to be exchanged for goods and are built for other purposes.
How to Use the Market Trends to Know the Right Cryptocurrency to Invest in.
We’re going to use Coinmarketcap, you are free to use other market cap charts and rankings.
- Now, to see the cryptocurrencies that are currently trending, simply click on “Trending” then select “Gainers and Losers“
- When the page loads, a list of the biggest gainers 1hour,24hours and 7days will be displayed. So better analysis, click on 24h and go through the list of coins, then click on 7days and also go through the list of coins. For instance, from the image below, it can be observed that “Flycoin” which was added recently has been doing well on the 24h list and 7days list.
One can decide to buy Flycoin from the available markets and exchange it for bitcoin as Flycoin grows in value.
How to Know the Available Markets Trading any Cryptocurrency
Still using Coinmarketcap, the markets currently trading a particular cryptocurrency can be seen/known by clicking on the said Currency then after that – click on Markets. As shown below…
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