By: Damian Okonkwo
The craze to make profits from cryptocurrency investments has often pushed many crypto traders to dabble in any crypto project they find on an exchange without carrying out proper research on the future of such crypto project. Some just jump into a given crypto project out of emotion when they find the price of a particular cryptocurrency rising. This Fear of Missing Out (FOMO) has trapped many crypto traders when they buy a particular cryptocurrency at a higher price. To make profits from cryptocurrency trading, the traders needs to put several factors into consideration before proceeding to place any order. Below are the major factors to consider while choosing a cryptocurrency to invest in.
Major Factors to consider while choosing a cryptocurrency to invest in
A. Maximum Supply: Crypto projects without maximum supply are subject to inflation and are not recommended for long-term investments. Not having a maximum supply means more quantities could be added to the circulating supply which will devalue the price of the cryptocurrency in the future. Therefore, having a maximum supply is an important factor that determines a strong crypto project. Bitcoin for instance has a maximum supply of 21 Million. This is one of the important features that has always set Bitcoin above every other cryptocurrency today.
B. Total Supply: This total supply refers to the total amount of the given cryptocurrency produced during its creation. This is to be distinguished from the circulating supply.
C. Circulating Supply: This refers to the total amount currently in circulation and purchased by investors. Often the circulating supply is used to calculate the market capitalization of a given cryptocurrency.
D. Team of Developers: The team behind a crypto project often determined how far the project could go in the future. Thus, when a given cryptocurrency has strong developers, then we can expect them to drive the project to greater heights.
E. Community supporting the project: A crypto project with a large community has greater chances of excelling in the future than those with few supporters. Often having a strong community helps in marketing the project to attract more investors.
F. Use case: The use case of a given cryptocurrency is usually the most important reason why long-term investors tend to purchase a particular cryptocurrency. High a good use case, creates more demand for a project, and attracts large investors.
Current Market Price/Market Capitalization: The best time for investing in a given cryptocurrency is when its prices are low and with a low market capitalization too.