Cryptocurrencies have seen a sudden uptick in investment are being considered as a future asset for investment. Despite many rumors associated with volatility, the crypto market is booming with time. However, there is risk involved. Therefore it is pre requisite for any new investor to know some basics of the crypto market. The crypto markets have seen many sudden falls in previous months causing investors to lose billions, most cryptocurrencies fell over 30 percent. Another major issue here is the popping up of new Cryptocurrencies everyday. Investment in cryptocurrencies without proper study will cost you heavy losses. So, it is important to look for a few metrics before investing in crypto tokens.
- Compare Market capital
You can use market capitalization to compare the value of cryptocurrencies to see a clearer picture and the sustainability of currency in the market. The market capitalization of any currency is equal to number of tokens in circulation multiplied by the current value of the single token. It helps investors to make more informed investment decisions. Like stocks, Cryptocurrencies can also be categorized into three groups based on their market capitalization, i.e, large-cap, mid-cap and small-cap. Always allocated most of your investment in large cap token and the remaining amount you can Invest in mid and small cap tokens according to your risk appetite.
- Check circulating supply
Circulating supply is the total amount of coins or tokens that are actively available for trade and are used in the market and by the general public. When a new token is launched only a percentage of the total value is made available for circulation, rather than the total supply. The circulating supply is always very small compared to the total supply of tokens. The circulating supply indicator is extremely important in the crypto-asset. The circulating supply decides the trade volume, higher trade volume is generally an indicator of good tokens.
- Price trend in relation to market trend
Understanding the price trend in comparison to the market trend is very important. Some people look at the average price of crypto to make investments. Whereas some people just look at the price trend ignoring the market trend. Analyzing the price trend of any token in relation to the market trend will give more clarity on how they may perform in the near future. If the price trend of a token is reflecting the current market trend, then it is a healthy sign.
- Do not go by social media
Rumors and social media campaigns often lead people to buy any crypto token, but cryptocurrencies with a strong base can prove to be wealth creators. So do your research and get an idea of the crypto you will be investing in in the near future. Avoid social media rumors and believe in fundamentals and market movements.
- Look for whales
Very big investors in cryptocurrencies are termed whales. You need to check for whale investors in the token that you want to invest in. If more than 50 percent of tokens are held by very few whales then you should not consider investing in that token.