Cryptocurrencies offer an exciting way to invest, but you need to know how to evaluate them first. Technical analysis typically examines price patterns, while fundamental analysis considers various factors affecting an asset’s value. In this article we’ll look at various aspects that need evaluating as well as how best to conduct fundamental analyses on cryptos.
Before investing in any cryptocurrency, the first thing to keep in mind is whether or not it solves a real-life problem or greatly enhances existing technology. If the answer to either of these is no, it may not warrant your time or investment. In addition, be mindful of tokenomics – which involves how a project plans to generate revenue and reward its community – since ideally these should be well thought-out plans with clear timelines.
Consider also assessing the team behind a cryptocurrency. Take note of their social media presence, engagement levels, past experience, as well as any successful projects they’ve been part of in the past. A team with plenty of prior experience can often be more reliable than one with no history behind them.
As part of due diligence for any project, it’s crucial that its website and white paper are carefully examined. An ideal website should be up-to-date, informative, free from spelling or grammatical errors and fully accessible by casual investors without technical jargon. Likewise, any crypto project should include an effective white paper that clearly details their objectives and technical details for casual investors as well.
Check both the circulating supply and maximum supply of any cryptocurrency before investing. A coin with limited supply tends to experience less price volatility and scarcity; additionally, its inflation rate will likely be lower compared to coins with unlimited supply which may lead to higher prices.
Finally, when looking at cryptocurrency markets and investments, take note of their market cap, trading volume, liquidity levels and potential for growth. A high market cap typically indicates an established cryptocurrency while low trading volume suggests less people are interested. Liquidity refers to how often an asset can be bought or sold within any given time period – it’s essential that these levels remain high so as to prevent price disputes arising between buyers and sellers.