4 Things You Should Know Before You Invest in a Cryptocurrency

The world of cryptocurrencies can be as exhilarating as it is confusing. Everybody wants to get their hands in the pot and try their chance at catching the next big crypto phenomenon. While cryptos do offer chances for great returns, making money in the crypto sector is much more complicated than many might think. Let’s take a look at some of the things you should consider before investing in a cryptocurrency.

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Look at the Technology

Buzz around a particular cryptocurrency shouldn’t be your first criteria when looking to invest. You should take the time to take a look at the technology, see what other observers are saying and take the time to do your homework as well. Look at the white papers on sites like ProCurrency and stay up to date with the news surrounding the virtual currency industry. If you see something that concerns you or you don’t understand the concept or technology thoroughly, ask for second opinions. Try to see if there have been vulnerabilities or concerns that have been raised about the technology. The buzz will only last for a short time, but the longevity of a cryptocurrency will ultimately depend on how strong the technology behind it is and if it actually fills a need in the market.

Look at the Team

Looking at the team behind a particular cryptocurrency is also important when choosing a virtual currency to invest in. Have they worked on previous projects before? If so, in what capacity and how did it go? How good is their reputation and what is the general sentiment about them?

You should also see if there’s an invisible hand behind the team of developers and what their intentions are. Are they trying to release an actual valuable product or is it just a pump and dump operation? If the developers are getting paid, how transparent are their salaries? Are there any conflicts of interest there? These are all things you’ll have to evaluate before you put your money in any cryptocurrency.

How Many Coins Are or Will be in Circulation?

This point is particularly important if you want to be able to know in which direction the coin will be going in the future. Is there a finite number of coins or can they pretty much create more coins at will? Is a portion of the coins owned by the issuer or is it completely decentralised? A scarcer coin usually means a more valuable coin and coins that are more centralised can also be controlled and manipulated, for better or for worse. So, make sure that you take all of this into consideration before choosing a coin.

Look at Technical Analysis

Next, you’re going to have to look at how the crypto’s price has been behaving lately. You’ll need to perform some chart analysis if you want to be able to identify trends and patterns with the price of the coin or token you’re thinking about. However, market analysis doesn’t tell the whole story, and due to the unpredictable and volatile nature of crypto markets, making forecasts can be very difficult. If you truly believe in a project, you’ll have no choice but to take a leap of faith in some cases and take calculated risks that you think might pay off in the long run.

Choosing a good cryptocurrency can be a challenge at first, but once you get a grasp of the basics, you’ll be able to recognise which ones have potential and which ones are just trying to take advantage of unsuspecting investors.