But, as many are learning from the case of bitcoin, it can be super rewarding as well. People who bought bitcoin even this year at rates of $4000, can sell the coin right now at almost $19,000 a pop. Calling it a great return would be an understatement.
Similarly, there are many other coins in the market today, which people can invest in. As the cryptocurrency mania catches on, more and more people are trying to find a currency that offers a strong foundation, suits their risk appetite, and matches their budget.
How to choose a cryptocurrency?
There are many ways people can go about choosing a cryptocurrency depending on how they choose an investment they do. However, there is a kind of consensus that these are few of the criteria that people should keep in mind while choosing a cryptocurrency to enjoy the best returns.
White Paper Research
Every single thing that one needs to know about a cryptocurrency is in its white paper. Not only ICOs, but every currency also has a white paper of their own. The white paper will have all the details of what the team behind a cryptocurrency is aiming to do and how they are planning to implement their ideas.
Their objective, the problem they wish to solve, the team behind the cryptocurrency, their roadmap, and more. Anyone who is planning to invest in a cryptocurrency should go through its white paper.
This is one of the key criteria to find a currency that is based on an innovative technology. The question to be asked is whether it is a disruptive technology or not. Bitcoin was absolutely based on a disruptive technology.
Similarly, Ethereum is also based on a path-breaking technology that currently has a lot of applications in the legal domain. Smart contracts of Ethereum can be put on a blockchain that can be publicly viewed. The applications of this technology are huge and the value of the cryptocurrency will certainly reflect that.
The same is true with the newer coins like SiaCoins, which is again a technology relevant to the decentralized storage solutions industry. The Siacoin has seen an impressive growth in the past year itself. So, the technology backing any cryptocurrency is a solid indicator of how the currency is going to fair in the future. The price should never be a criterion to buy a particular cryptocurrency.
It should always be the underlying technology and the future potential of that technology.
The Real World Test
Before investing in any cryptocurrency, the prospective investors should check its current market capitalization. They should look at a granular level to find out the number of coins that are circulating in the market at the present time.
Why is that important? Because that will give them the idea as to how many coins are going to hit the market in the future. If there are more coins expected in the market in the future, then the value of the coin can toss up anytime. Investors should also have one thing clear in their mind.
Volume of Trades
24-hour trading data of all significant cryptocurrencies is available on the internet. But, how does it help to choose a good investment? Simple. The more popular the currency, the more it will be traded. So, pull out the trading volumes for the cryptocurrencies you have been eyeing.
A higher volume will help investors to choose a cryptocurrency that is well-established. 10million dollars’ worth of trading volume is a good place to start. This kind of volume ensures that there is a decent percentage of investors who believe in the currency.
Check who is running the show?
When investing in a stock, people usually look at the CEO running the company and the management team backing him. Why? Because this is the team that will take the decisions that will drive the company’s profits. In a similar way, when it comes to cryptocurrencies, it is the developers that the investors should look at.
Now, anyone who can code can create a new cryptocoin. So, it is very important to know the developer behind the cryptocurrency you want to invest in. Majority of good coins are announced on public platforms. To know whether or not a coin is legit, track the activities of the developers on different online platforms.
Cryptocrrencies are complex, so no new developer in the network will announce a coin right away. There will always be some history like discussion on the original idea about the coin, new features added to the coin, regular updates about the coin, and so on. The developer will also be ready to engage in discussions, reply to questions and answer queries about a legitimate coin.
Support for the Crytocurrency
Keep one thing in mind that sentiments about a coin do influence its real value. So, if investors are looking for a cryptocurrency to invest in, they should definitely look at the kind of support it enjoys online. See if there are any conversations taking place about the currency. If there are active social media handles, this means that the cryptocurrency is alive and kicking.
Secondly, they should also look into the core community behind the coin. The larger the community, the stronger the coin is and the better prospects it has in the future.
What Are The Most Popular Options Today?
Now that you have a fair idea about how to choose a cryptocurrency, here are some of the most popular coins in the market today.
This cryptocurrency was created by Charlie Lee and it was created to solve the problems Bitcoins couldn’t. First of all, the block time for Bitcoins is a whopping 10 minutes, which renders it almost useless for everyday transactions. But, Litecoin was able to bring it down to 2.5 minutes. This also brought down the cost of each transaction. Litecoin can be seen as an updated version of bitcoin. Litecoin is a well-established coin by a respectable developer. There are a total of 84 million litecoins that can be mined and the prices of litecoin have been steadily going up.
This is one of the most interesting cryptocurrencies out there. Monero offers its users complete anonymity of transactions. It is impossible to track a Monero coin and that is the kind of technology that investors should look at, when they are buying a cryptocurrency.
The Monero coins have been designed by a group of developers who have been working out of the money they get from contributions and donations. Also, they have not kept any fraction of the cryptocurrency to themselves. Monero currently enjoys a market cap of $600+ billion, which makes it a really attractive currency to invest in.
Ethereum has generated a lot of interest in the market. As already mentioned, the disruptive technology Ethereum has to offer is smart contracts. These contracts execute themselves automatically. There is a whole team of well-known developers behind Ethereum, and it is way more structured than Bitcoin.
The Ethereum platform also enjoys the support of corporate biggies like Barclays that actually use the technology for a part of their business. The market capitalization of Ethereum also stands at an impressive $600+ billion. The currency has shown a steep growth.
There are many experts that predict that Ethereum is going to peak in 2018, and it may even leave Bitcoin behind in the cryto-race that is going on.
Are There Any Other Options?
There is a whole buffet of cryptocurrencies in the market today. However, spending money on useless coins, just because they are cheap, is not really a wise decision. But, there are some currencies that are still gathering steam and may be able to give really good returns to its investors in a few years.
Currencies like XRP by Ripple and SiaCoins by Sia are some of the best options out there. They still cost pennies, but have a promising future because they check all the boxes stated above.
Choosing a cryptocurrency is not an easy task. But, if investors take into account the checks stated above, they will be able to narrow down to a few currencies in a whole blizzard that is available out in the market.
Cryptocurrencies are creating millionaires every single day, but they can make their investors bankrupt that swiftly too. So, tread carefully.