What You Should Know Before Investing in Bitcoin
A cryptocurrency is an encrypted decentralized digital currency that can be transferred from one individual to another.
Since the launch of Bitcoin, many players have joined the market. Aside from Bitcoin, the other top players are Ethereum(ETH), Litecoin (LTC) and Ripple (XRP).
With many cryptocurrencies in the market, it is difficult for traders to choose which to trade.
The problem of decision is made harder by new market players touting their currencies as the next Bitcoin. Below are tips to follow to choose which cryptocurrency to trade.
Choose Your Level of Risk
With more than 2300 cryptocurrencies in the market, Bitcoin is the most volatile and stable. Investing in BTC is seen as a safe bet because it is the oldest in the market and is priced below its $20,000 all-time high.
The other cryptocurrencies are referred to as “altcoins” with ETH, LTC, and XRP being established and stable cryptos.
It is advisable to spread your risk by diversifying your investment. To strengthen your investment portfolio, you may have to invest in one or more stable digital currencies.
Stable currencies are designed to mimic flat currency. These keep price fluctuations minimum and are a good way to put your money into a cryptocurrency exchange.
Conduct Independent Research
While listening to a company’s representatives and ready opinions is important, nothing gives you better judgment than conducting independent research. Before deciding to trade BTC/USD vs ETH/USD or any other cryptocurrency, look at their historical charts.
Areas to pay attention to should be circulation and market cap. While the price is important, it is not something to get stuck on.
Look for stability and dig up a cryptocurrency’s full history. A digital currency could still be in its growth stage and might show a record of continuous growth.
On the other hand, it might have a history of big peaks and large corrections. Avoid currencies that have suffered large drops in their market cap. This is an indication of dying demand.
Find out as much as you can about the company offering the cryptocurrency, and the problems it intends to solve.
Seek offerings that have innovative technology and strong backing of the idea. Research on the leadership of the company, their technical team and the track record of the CEO.
Be on the Lookout for Possible ICO Offerings
Initial Coin Offerings (ICOs) are the go-to method for digital currency companies looking to come up with working capital and roll out new cryptocurrencies.
Similar to the stock market, this involves betting on the company that can deliver the product and gives you returns on your investment.
When choosing which cryptocurrency to invest in, ICOs present you with a good opportunity. In essence, you have no historical charts to guide you. So you have to rely on your understanding of the offering, what makes it stand out in the market, and the team behind the offering.
Since you are starting from the ground up, investing in a good ICO will help you achieve big gains. To help you be in a position to spot the next profitable ICO, look into past successful offerings and keep track of trend in the industry.
Look into Unknown Crypto Exchanges
If you missed out on an ICO, you have a chance to buy the currencies on cryptocurrency exchanges. Most well known and established exchanges limit the currencies they trade. You are likely to find a better investment on lesser-known platforms.
To protect your investment, conduct independent research on the crypto exchange and the people running it.
Be Aware and Vigilant
Choosing which cryptocurrencies and altcoins to trade can be a daunting task. Sticking to the facts and not making emotional decisions will help you select the investment that will be right for you.
Once you have selected the coin you want to invest in, remain vigilant and monitor your portfolio closely. Be on the lookout for all news regarding your investment and continue conducting the same independent research as you did before investing.
Altcoins might not experience the same rapid growth as Bitcoin since some are in the growth phase. However, choosing the right cryptocurrency to invest in can lead to lucrative returns.