Are you considering investing in cryptocurrency? Like many people, you could be pushed into buying cryptocurrency due to their popularity and the possibility of making substantial sums of money as investment profits. Truth be told, the rise of cryptocurrency has simplified many transactions.
Many people currently prefer exchanging digital currencies for services and products instead of the traditional way of handling paper money. Also, others find it convenient to buy a cryptocurrency and sell them for higher returns. You could be one of these people. Therefore, this article discusses the various factors you should look for when buying cryptocurrency. These factors are designed to assist you in taking informed actions in this trade, characterized by risks and volatility.
It Could Be Bubbly
Cryptocurrency prices are always dancing between two extreme ends. The pendulum swings from a peak increase in prices at one point to the lowest possible value, a typical crash. These fluctuations are attributed to the general volatility of the market crypto prices.
For instance, in December 2017, Bitcoin’s price, the most popular cryptocurrency on the market today, hit a peak of about $20,000. After dropping to below $12,000 within a week, this value has been fluctuating between highs and lows, as evidenced by its near-tripling in 2019, an incident that is yet to be witnessed. However, it does not mean that these price changes leave crypto investors with losses always. With a keen analysis of these trends, you stand a chance of making high returns after knowing the right seasons of committing your dollars in crypto trade.
Volatile Prices
The prices of cryptocurrency have never been stable for periods measurable. They keep on changing, sometimes within weeks, days, or even hours. This is also another factor you need to know right before investing in crypto. The prices skyrocket rapidly when more people purchase digital currencies and shrink faster as more people start selling the coins for returns. Simply put, crypto prices are determined by the supply-demand curve.
Moreover, the media has a significant impact on crypto prices. When the news comes out in favor of cryptocurrency, their prices tend to shoot higher, which means the demand is increased. In contrast, news about impositions of bans or regulatory measures adversely affects cryptocurrency’s popularity, resulting in reduced prices due to low demand. Therefore, although affected by external factors, price fluctuation is an important consideration when buying crypto.
Transparency
The world is embracing digital modes of payments and cryptocurrency because they are built on reliable blockchain technology. As a result, transactions in cryptocurrency are immutable and digitally traceable. Additionally, they are instantly updated and made public, leaving no room for fraud. To transact in crypto, you are only required to download and install a digital wallet to keep your digital coins safe. There is no need to expose personal information, such as name and address. At dramatically reduced costs, crypto transactions connect people of different walks around the planet, independent of third parties. In contrast, the cost incurred in these transactions is the blockchain fees, and you are ready to trade in cryptocurrency.
Business Proposition
Like any traditional businesses or startups, cryptocurrency should be perceived as one way of solving a financial problem. You do not want to invest in crypto for leisure or pleasure. In contrast, having outlined your personal financial goals and priorities, it is worth risking the money to purchase crypto to grow financially, as in any business. Therefore, evaluate the team to invest with, based on their goals, strategies of achieving them, and their commitment towards the quest. This is especially essential when considering a long-term investment. Stick with those projects that add or promise tangible value in the long run.
Furthermore, related to this is the evaluation of the role played by the cryptocurrency being marketed. For instance, just like in the stock market, buying and holding security tokens means part of the company belongs to you. In contrast, utility tokens are redeemable in exchanging the blockchain services. Therefore, to avoid unnecessary hype, better evaluate the type of business proposed when purchasing cryptocurrency.
The Market Cap
Another essential factor to consider as a beginner wants to buy cryptocurrency in the crypto market cap in which to invest. This describes the highest limit to which one crypto is likely to grow in a certain period. These margins are not easily measured based on the current market price of the crypto being bought. In contrast, various factors, such as the total and increase in capitalization, are indicated by the market cap. The total capitalization is the product of the unit token value and the total number of tokens being circulated. A cryptocurrency with a high market cap is likely to have limited growth potential.
Similarly, a cryptocurrency with high value since its ICO has a reduced likelihood of progress. In contrast, a crypto with extremely low value is possibly a scam. From this observation, caution is exercised when investing in crypto with high capitalizations, which imply limited growth. Furthermore, apart from being a possible scam, be careful when going for cryptocurrency with declined value. This could imply that the responsible team sidelines the market growth in favor of the project. Therefore, investing in such cryptocurrency requires sufficient research for an informed decision.
The Bottom Line
This article has discussed the various factors to consider as a guide when buying cryptocurrency. Many people jump right into investing in cryptocurrency without weighing the facts regarding what is expected in the long run. With these considerations, you will likely avoid unnecessary hype and possible scams that usually befall many beginners. Moreover, knowing the nature of the market prices, the possible fall, and the rise of returns, you become prepared for any eventualities that come with such risky investments.
However, it becomes easier to know when to invest for higher returns as the market swings in your favor and identify the right team to work with in line with personal financial goals and priorities. Need more help? Visit https://www.instantloan.sg/.
