The cryptocurrency industry is currently flush with investments. There are people who see them as schemes to get rich quick, while others believe in them and are willing to work with them.
Whatever the reason is, you’re making cryptocurrency investments to make money. Everyone is profit-oriented, and that focus is what drives all of us. However, given that cryptocurrencies are still pretty nascent, it’s understandable that you might not know what to invest in.
In this guide, we’ll look into how you can spot a profitable cryptocurrency and get ahead of the curve.
Make sure the asset has a purpose
When you’re investing in an Initial Coin Offering or a cryptocurrency for trading, you will need to ensure that it is related to a project that has a definite use. This use is the project’s selling point and what differentiates it from other crypto projects.
For instance, when Bitcoin first came to the scene, many other “cryptocurrencies” came in as clones of the real thing, hoping to piggyback on the hype for it. Fast forward to today, and you’ll find that they’re all dead. Really, the only people who could have made money are the people who made these assets in the beginning.
Ether came out with a focus on becoming a proper store of value. The asset also had significant applications for developers who wanted to make applications. At the same time, it works for transferring data and being a trove for information.
Due to Ether’s innovation, the asset has risen in value. More people are looking to build platforms based on cryptocurrencies, develop smart contracts, and store information. This means that Ether will remain useful, and adoption will keep rising. Ergo, you will find a growth in the asset’s value.
There are many examples of this. However, the point here is that you should keep the following in mind when looking for a cryptocurrency to invest in:
- The asset should have an actual use case. Bitcoin already functions as a store of value, and more coins do the same thing. Look for the prospective asset’s specific use
- When a token’s use case is more generic, it won’t be able to succeed. If you see descriptions like “decentralized blah blah blah,” you know that it will most likely not be able to do much. Don’t look for buzzwords – be specific in looking for a use case
- Ensure that the use case is also pretty logical. When looking at coins, examine their purported use cases and think about whether they can really succeed.
- You can also review some of the asset’s recent performances to see whether it has merited investment. For this step, it might help if you had an analyst to help you out.
Gather reviews from sources
Currently, there are several message boards that serve the cryptocurrency industry. They act as forums where people interested in the technical details of Bitcoin and crypto development discuss and share opinions.
One of the top forums is BitcoinTalk. On this platform, most cryptocurrencies have Announcement threads. You can find the first announcements for ICOs and more on these threads. There, you can also find people who scrutinize the assets and look into whether they’re viable as investments or not.
If you want to research a coin, just look for its thread and read the pages underneath. These threads usually contain questions posed to the developers of the assets, and you can look into whether the developers answered the questions well or not.
- Are they answering questions?
- Are their answers shady?
- What amount of clarity do their answers bring?
Consider all of these and you’ll be able to know where the assets stand. Also, check threads for comments. Use specific keywords (such as “MLM,’ “scam,’ “con,” “scamcoin,” etc.) to know whether the sentiment around the asset is positive or otherwise.
Also, be wary of threads that seem too positive. Check the comments well and scrutinize them. A lot of developers can pay people to leave overly positive comments on their forum threads.
Don’t be unrealistic
If you’re an investor, one of the many things you need to understand is not to invest in assets that are promising overly high returns.
Just as it is with stocks, you should ensure that you don’t get sucked into assets and projects that promise you too high. When an asset’s developers market their project as giving you thousands in returns on investment in a day or in a year, you know that things are not right.
A lot of people tend to make the mistake of looking at returns and throwing money at cryptocurrencies. Make sure not to do this.
Check the developers too
Whenever you find a coin you want to invest in, you need to check the developers’ website to see who they are.
Ensure that the developers and team members are real people. Check their names, pictures, and credentials. If you can’t see them or any of their details, you know something’s not right. Get their names, go to platforms like LinkedIn and other social media sites, and see if you can find them.
In today’s world, pretty much everyone is online. If you can’t find details about these developers and team members, don’t invest your money.
It’s easy to look at the cryptocurrency industry and think that every asset you throw money at will give you great returns. The space is currently at its most vibrant, and many people are looking to cash in. However, the truth is that investing in crypto is just like making investments everywhere else. If you get stuck in the euphoria and you don’t look before you leap, there’s a significant chance that you could get burned. The tips above will help you to weigh the risks of investing in a digital asset before you make that move. You never know how a little due diligence could go far in saving you.