6 Questions To Ask When Assessing Your Next Cryptocurrency Investment

by Andrew McGuinness     Jul 16, 2019

Bitcoin’s meteoric rise over the last year has charmed its way into the public spotlight, but as trading 101 teaches us, no stock or asset can rise indefinitely. There is reason to believe that Bitcoin’s rise may begin to sputter, and while it may continue to grow, it may never again see the multi-thousand explosion in valuation that it saw in 2017.

However, blockchain technology and the cryptocurrency world offers many other opportunities for savvy investors who know when to look for the next big thing. There are hundreds of other cryptocurrencies on the market—known as altcoins—which are rising just as quickly as Bitcoin. Finding the next best thing and investing in it while it’s worth just a few cents can earn you thousands if not millions. But how do you know where to look? Here are 6 questions to ask when assessing your next cryptocurrency investment:

1) How unique is this coin?

There are countless ways that blockchain technology can be used, and many of these uses are being discovered every day. However, as revolutionary as blockchain tech can be, it is important to remember that there are also many junk ideas. Investing in coins that offer no value and added functionality would just be a waste of your money, as it will never be expected to grow. In worst case scenarios, it might even be a pump-and-dump scam.

2) Where is it listed?

Ask yourself, where is this coin listed? The more cryptocurrency exchanges a coin is listed on, the easier it is for investors to pump money into the coin and the easier it is for the coin to gain widespread recognition. If the coin is listed on just a limited number of smaller exchanges, then it might be a bad idea to invest.

3) How is the community?

Every cryptocurrency has a community. The dedicated and loyal following that believes in the coin and what it offers, and believes that it will someday revolutionize the niche that it specializes in. Before investing in a coin, it’s important to take a look at the community around the coin, either on Reddit or Bitcoin.org. Check how friendly and open the community is, and how enthusiastic they are about the growth of the coin. But make sure to keep yourself rational—there are many who hype up their chosen coins for no reason at all.

4) How is the communication?

The coin’s communication consists of everything from its whitepaper to the educational material around it—this includes social media, videos, blog posts, and other ways of educating the public submitted by the coin’s team or its following. Is everything easy to understand, or is it too difficult for newcomers to come on board?

5) Who is the team?

The team is incredibly important. Knowing that the people behind the coin are recognized engineers and financial experts is crucial towards knowing whether or not this is a coin worth investing in. There are many coins out there that are created by scammers looking to make a quick buck. Learn the difference by checking their credibility.

6) How is the coin distributed?

The team behind the coin dictates how the coin is distributed—whether the coin is mined, or if it’s stored and locked up, whether it will be burned per transaction, or whether it will be sold to the highest bidder. Analyze the way the coin is distributed and try to understand the reasoning behind this distribution. If no flaws can be found in their logic, then that adds to the potential of investing in a good coin.

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