The cryptocurrency market was born in 2009 after the launch of a project called Bitcoin (BTC).
A cryptocurrency is an encrypted decentralized digital currency that can be transferred from one individual to another.
Since the launch of Bitcoin, many virtual currencies known as altcoins have been created and entered the market. Besides Bitcoin, the other important coins are Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Bitcoin Cash (BCH).
With so many cryptocurrencies on the market, it is difficult for investors and traders to choose which currency to trade.
The decision problem is made more difficult by new market entrants touting their coins as the next Bitcoin. Below are some tips that will help you choose the best cryptocurrency to trade.
Choose your risk level
With over 2,300 cryptocurrencies on the market, Bitcoin is the most volatile and stable. Investing in BTC is seen as a safe investment because it is the oldest on the market and is priced below its maximum of $$ 20,000.
The other cryptocurrencies are referred to as “altcoins” with ETH, LTC and XRP being established and stable cryptocurrencies.
It is advisable to spread the risk by diversifying the investment. To strengthen your investment portfolio, you may have to invest in one or more stable digital currencies.
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Stable coins are designed to mimic fixed currency. They keep price fluctuations to a minimum and are a good way to put your money in a cryptocurrency exchange.
Do an independent search
While listening to a company's representatives and their ready-made opinions is important, nothing makes a better decision than doing independent research. Before you decide to trade BTC/USD vs ETH/USD or any other cryptocurrency, look at their historical charts.
Areas to watch should be circulation and market capitalization. While price is important, it's not something to get hung up on.
Look for stability and dig up the full story of a cryptocurrency. A digital currency may still be in its growth stage and may have a record of continued growth.
On the other hand, it may have a history of big spikes and big corrections. Avoid currencies that have suffered large drops in their market capitalization. This is an indication of dying demand.
Find out as much as you can about the company offering the cryptocurrency and the problems it aims to solve.
Look for offers that have innovative technology and strong backing for the idea. Research on the company's leadership, its technical team and the CEO's background.
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Stay tuned for possible ICO offers
Initial coin offerings (ICOs) are the preferred method for digital currency companies looking to work capital and launch new cryptocurrencies.
Similar to the stock market, it involves betting on the company that can deliver the product and gives you a return on investment.
When choosing which cryptocurrency to invest in, ICOs present you with a good opportunity. In essence, you don't have historical charts to guide you. So you need to trust your understanding of the offering, what makes it stand out in the market, and the team behind the offering.
Since you are starting from scratch, investing in a good ICO will help you make big gains. To help you identify the next profitable ICO, review past successful offerings and keep up with recent industry trends.
Analyze Unknown Cryptocurrency Exchanges
If you missed an ICO, you have a chance to buy the cryptocurrencies. The most well-known and established exchanges limit the currencies they trade. You are likely to find a better investment on lesser-known platforms.
To protect your investment, do independent research on the exchange and the people who run it.
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Be attentive and vigilant
Choosing which cryptocurrencies and altcoins to trade can be a difficult task. Sticking to the facts and not making emotional decisions will help you select the right investment for you.
Once you've selected the currency you want to invest in, stay tuned and monitor your portfolio closely. Stay tuned for all the news related to your investment and continue to conduct the same independent research you did before investing.
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Altcoins may not experience the same rapid growth as Bitcoin, as some are in the growth phase. However, choosing the right cryptocurrency to invest in can lead to lucrative returns.