The cryptocurrency market is a much larger phenomenon than ordinary Internet users see. About 20 thousand coins and tokens are presented on various trading platforms. The vast majority of this is outright garbage that does not deserve attention. But at the same time, there are promising viable projects among them that can bring profit.
How to choose coins for investment
Coinmarketcap is an excellent source of information about cryptocurrencies. In addition to the rating of the coin by capitalization, it also contains other relevant information that gives an idea of the project and the position of the asset on the market.
For investments, it is best to choose cryptocurrencies from the TOP-30. They are traded on many exchanges and are relatively stable. This does not mean that less popular coins and tokens are completely unsuitable for investment. When investing in them, it is worth remembering that in this case, a non-zero probability of a sudden scam is added to the typical market risks.
What metrics to look out for
The rank of the coin is the first thing that is taken into account. This place in the rating by capitalization.
Coin price – it is quite logical that it is preferable to buy cryptocurrencies that are cheap. Especially if they are trading close to an important support level. The probability of resumption of price growth in such cases is higher.
Market capitalization is the total value of all coins in circulation, expressed in US dollars.
Volatility is the rate at which the price of a cryptocurrency changes. Volatile coins are chosen for investment. Tether and other dollar-pegged stablecoins are used not so much to raise capital, but to fix profits or save money. They are quite stable, so it makes sense to consider stablecoins as an investment if you use a sovereign fiat currency that is subject to inflation in everyday life.
To calculate volatility, we divide the market capitalization by 100 and compare it with the trading volume for 24 hours. If the daily trading volume is more than 1% of the market capitalization of the coin, it is characterized as volatile.
Circulating supply – how many coins have already been put into circulation. The fewer coins, the higher the growth potential.
The total supply is the maximum number of coins planned to be issued.
The maximum supply is how many coins can ever exist.
Ideally, the total and maximum supply should be the same. However, if the difference between the total and the maximum offer is too obvious, look for additional information. Perhaps some of the coins are held by the developers themselves. In this case, a mass sale of coins is not excluded, and if this happens, then certainly at the most inopportune moment. Perhaps some of the coins are regularly withdrawn from circulation and destroyed. In this case, the asset will rise in price over time.
Markets – on how many exchanges the cryptocurrency you are interested in is traded, with which fiat and digital currencies it forms trading pairs. The more platforms support the coin, the better. If an asset is traded on one or two exchanges, then it is better not to risk it. Delisting is not a rare and not particularly joyful phenomenon. But for Litecoin, this is not a disaster, but for a cryptocurrency that was presented on one platform, this could mean the end of existence. At the same time, you will find out exactly where it is possible to exchange BTC to BTM or other relatively rare cryptocurrencies.
Graph – a graph of changes in the price of a cryptocurrency gives an idea of local and general trends, possible prospects for a fall or rise. If the price has risen sharply, it may not be the best time to buy. On the contrary, a fall in the exchange rate may be a good point to enter the market.
Best coins to invest
If you are just starting to get acquainted with the cryptocurrency market, it makes sense for you to take a closer look at several projects.
Bitcoin is a long-lived cryptocurrency, the patriarch of the market. It ranks first in all important market indicators and is consistently regarded as the No. 1 candidate for inclusion in an investment portfolio.
Historically, Ethereum is still significantly younger than Bitcoin. The Ethereum blockchain provides the technical capability for building and deploying decentralized applications, smart contracts, and other cryptocurrency projects.
ETH steadily holds the second position in the rating.
Ripple (XRP) is a cryptocurrency that has been around since 2012. The project aims to improve the traditional financial system. XRP trades just above $0.33.
Binance Coin (BNB) was launched in 2017. This is the native token of the Binance cryptocurrency exchange. The active development of the ecosystem gives grounds for optimistic forecasts of the future prospects of the BNB.
The listed coins can be considered as potentially promising for both long-term and short-term investment.