With over 1,600 cryptocurrencies in existence, it can be tough to know which ones are worth buying into. However, there are a few key factors you can look at that will help you narrow down the field and choose the right currency for you.
In this blog post, you’ll discover a few things to consider before buying any cryptocurrency.
What Problem Does the Currency Solve?
Cryptocurrencies are created with the intention of solving a specific problem or filling a need within the digital world. For example, Bitcoin was designed to be a new form of digital cash that is not controlled by any central authority. Ethereum, on the other hand, was built as a platform for developing decentralized applications.
When considering which cryptocurrency to buy, take a close look at the problem that it intends to solve and decide if you believe in its mission.
What Is the Value of the Currency?
Much like traditional stocks and shares, the value of a cryptocurrency is based on supply and demand. If more people are interested in buying a certain currency than selling it, then the price will go up.
However, if there is more selling than buying pressure, the price will go down. Before investing in any currency, be sure to do your own research and find out what analysts are saying about its future value.
How Is the Currency Built?
The technology behind a cryptocurrency can tell you a lot about its potential future success. For example, Bitcoin is built on a blockchain system which makes it very secure but also slows when compared to other currencies such as Litecoin or Dash.
When looking at different currencies, make sure to read up on their technology and decide if you think it is robust enough to last in the long run.
Check the Coin’s Trading History
Once you’ve considered all the above factors, look at the coin’s trading history. How has its price fluctuated over time? Is it subject to large swings in price or is it relatively stable? Does it have a strong community backing it?
Answering these questions will give you an idea of how risky an investment in this coin might be.