Learn to Evaluate Cryptocurrencies Before Buying Them


Trying to figure out how the crypto scene is working can seem daunting. However, you can take advantage of online resources to learn how to develop strategies that enable you to make a profit. 

The crypto market has drawn the attention of both seasoned and beginner investors in the last few years. While Bitcoin is the largest cryptocurrency by market cap and the most popular one among investors, alternative coins like Ethereum also make great portfolio additions because they have more utility cases. 

Digital currencies will probably remain the hottest assets on the market for a long time. Their values tend to soar up to tens of thousands of dollars every time a bull market comes, making a great reason to invest in them at the end of the bear market. 

Suppose you plan to buy cryptocurrencies for the first time because you want to try your hand at investing in this sector. In that case, you might deal with the common problem of not knowing which asset to pick because the news pieces you find online confuse you and provide you with contradictory information. For instance, if you choose Ethereum as a reliable investment, you must check the ETH coin price from multiple sources to form a sustainable strategy.

This article provides you with recommendations about how to pick digital currencies for your investment portfolio. 

Visit the cryptocurrency’s official website

All reliable crypto projects have websites that provide complete information about the asset. Creating a website is easy nowadays, and if the developers are serious in their efforts to create a digital currency that serves the buyers, they will invest in an informative, updated and engaging website. 

When you visit the website, it’s crucial to look for a couple of things:

– It’s user-friendly and offers updated information

– The content has no spelling or grammar errors

– It provides information about the developers and team members

– It includes the crypto’s white paper

– The crypto’s objectives are clearly defined

Read the project’s white paper

As mentioned before, you should find the cryptocurrency’s white paper on its official website. Take the time to read it because it provides vital information about the asset and serves as a tool to evaluate it in comparison to other tokens from the same category. The document usually contains data about the project’s strategies, goals, and utility cases so you can figure out if it’s worth your time and money. The white paper functions like a road map for the currency, and it’s a tool that helps you figure out how to allocate money to the project. 

The official document also includes the tokenomics of the cryptocurrency, which tells you how the coins are distributed among holders and if the token has a supply limit. In case the ecosystem includes mechanisms like token mining and token burning, you can also find information about them in the white paper. 

Unfortunately, some white papers are highly technical, and it’s challenging for someone to understand the content. In these cases, you can join a specialty forum and engage with seasoned traders to explain the project’s functionality.  

Use social media channels to learn more about the token

Another way to gain insight into a project is to visit its social media accounts. Large crypto projects have several social media pages on networks like Twitter, Facebook, Reddit, and Discord. 

Suppose you want to invest in a new project, take note of the number of followers and check out if the account interacts with them in the comment section. Scroll through the comments to find out if the community moderators actively participate in conversations with the followers, promote events, or answer questions. You want to ensure they have legitimate answers when users ask about a crypto feature or utility. 

It’s easy to spot a scam account; it usually is quite spammy in the sales approach and doesn’t engage with the followers. 

It’s also a great idea to join social media groups to find out what the community has to say about a digital currency’s evolution. 

Don’t believe stories that are too good to be true

You most likely heard stories about investors who got rich overnight after purchasing a cryptocurrency no one has ever heard about. Remember that these assets are highly volatile, and their value rises not only based on their utility but also on the public sentiment. With thousands of cryptocurrencies available on the market, charlatans can make their way into the sector and weave far-fetched stories to capture people’s attention. 

Many projects promised to deliver returns on investment higher than Bitcoin, but they only promised unrealistic benefits because it’s challenging for a cryptocurrency to reach Bitcoin or Ethereum’s market capitalizations. 

As a first-time buyer, you should look for specific factors that impact the currency’s value instead of believing stories. 

Find more about the project’s team

Cryptocurrencies are assets built with the help of blockchain technology, but not all have the same features, and their functionalities and features differ. Therefore, the success of a project is dependent on the developers and how they created the digital currency. You’ll notice that some projects like Ethereum have developers involved in other successful coins launched, so you can rest assured that the latest crypto they released will also perform great. 

The white paper usually provides information about the project’s team. You could also visit the website if you want to learn more about them and their previous work. 

Study the price history

You can find graphics that help you track an asset’s evolution on exchange platforms. Before purchasing a cryptocurrency, it’s crucial to study its price history because the market is volatile, and all assets, regarding their market cap, experience price fluctuations. You should ensure the asset you want to purchase increased in value gradually over time and doesn’t register a spike overnight. Considering that we’re heading toward the end of the bear market, it’s important to check the all-time high of the asset in the previous bull market. 

Please don’t invest in coins that have exaggerated highs over short periods because they usually indicate pump-and-dump scenarios. 

Bottom line

We hope you find it easier to decide what cryptocurrency to purchase now that you know what pointers to look for. 

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