As Bitcoin has shown, there is tremendous upside to cryptocurrencies as alternative investment mechanisms. But as you do your research, you’ll discover that there are dozens of different altcoins on the market. How do you possibly compare and contrast them and make an educated decision?
4 Tips for Evaluating and Comparing Cryptocurrencies
Bitcoin, Litecoin, SmartCash, Ripple, Monero, Steem, Cardano…. If you’ve started looking into cryptocurrencies, then you’re probably overwhelmed by how much information is out there. Don’t worry, though. You can make sense of it all if you know what you’re looking for.
Here are a few handy tips and tricks:
Get the Right Information
It’s always smart to educate yourself on the facts prior to letting the opinions of others influence your thoughts. This means going straight to the source.
Every coin has white papers and/or official documents discussing the fundamentals of the coin and how it works. While often laced with technical terms you won’t understand, there’s plenty of valuable information tucked in there.
Gather Opinions From Outsiders
Once you’ve researched some of the facts on your own, feel free to do some online research, read message boards and forums, and talk with investors. Third-party opinions can prove very useful, especially when you’re new to cryptocurrencies. There’s a really good subreddit on the topic of cryptocurrencies, if you’re interested in interacting with others.
Consider the Business Model
You need to understand the monetary rules of any coin before investing. The differences between two coins can result in two totally different investments.
Take as an example. Whereas most coins reward the “miners” at the expense of others, SmartCash is more community-centric in how rewards are allocated. This setup prevents mining centralization and stimulates network growth.
Then you have currencies like Dogecoin, where 100 billion coins have already been fully mined. However, because there is no hard cap, they’re projecting growth of 5.256 billion coins per year.
Does this all sound like a foreign language? This is a sign that you need to do more research on the fundamentals of cryptocurrencies before you start investing your hard-earned money. It’ll take some time to wrap your mind around it, but you’ll eventually get the hang of it.
Take Market Capitalization Into Account
When examining various cryptocurrencies, you’ll want to take market capitalization into account. Coins with low market capitalization can be easily manipulated by people who own a large percentage of the currency. They’ll use pumps and dumps to inflate or lower valuations, which benefits them and hurts everyone else.
On the other hand, coins with a large market capitalization are much harder to manipulate and require a larger capital base to have any significant influence over the price. Barchart.com is a good resource for staying updated on things like price, volume, market cap, and supply.
Don’t Invest Until You Know
It’s never a smart idea to invest your money in something you don’t fully understand. Whether it’s a mutual fund, retirement account, business venture, piece of real estate, precious metal, or cryptocurrency, you should study the facts and do as much research as possible to ensure you’re making an educated decision.
After doing some research on the topic, you’ll come to realize that cryptocurrencies aren’t the sketchy investments mainstream media members and Wall Street “gurus” make them out to be. They’re actually forward-thinking currencies with lots of promise and opportunity. As such, the question isn’t, “Should I be investing in cryptos?” The better question is, “Which crypto should I be investing in?”