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How do I analyze cryptocurrencies?

 


Have you found an interesting crypto project, but don't know whether it's worth an investment? In search of the next big thing in the crypto market, investors often take big risks without realizing it. Behind supposedly great opportunities are usually the greatest risks. However, many investors ignore them when looking for the next Bitcoin, Ethereum or Solana. In order not to invest uninformed, we will show you today what you should pay attention to if you want to evaluate a crypto project.


your strategy

Your personal strategy should be the main reason for an investment decision. First, be clear about what your strategy is.


You should be able to answer these and other questions before you buy the token. Not every token suits every investor. Above all, willingness to take risks, age and the amount invested play a decisive role.


The project idea

The project idea is the main reason for most investors to invest in a cryptocurrency . You should be clear about what the goal of the currency is. Should the token provide a blockchain platform that allows developers to build DApps, create NFTs or trade smart contracts? Or should it be a classic cryptocurrency, possibly even a stablecoin? It is important for the project idea that it is unique and not just the next memecoin imitation.


Many tokens and crypto projects promise the Garden of Eden, but cannot fulfill these promises due to a lack of competence and implementation. The logical consequence is usually massive price losses. Cardano, for example, promises to become the new Ethereum - but so far without success. So you should be clear about how your investment idea wants to solve the problems that other tokens have. Are the ideas innovative?


To do this, you must first determine what the basic technology of the project is. Is proof-of-work, proof-of-stake or other proof-of used? How does the blockchain intend to reach the magic triangle ?


For most long-term shareholders, fundamental analysis is key. It shows sales and profit growth & Co. In addition, the valuation of the share is calculated. In the case of cryptocurrencies, operational figures in particular are not available, which makes fundamental analysis difficult. For crypto investors, the market capitalization is particularly important. How much is the total number of available tokens worth? Especially tokens with a low market capitalization are usually highly risky and volatile. You can also track the trading volumes of the cryptos via the relevant platforms. This can show you how "hyped" a currency is. It can also give you information about how liquid the trade is.


For traders, chart technique is the decisive entry criterion - for long-term investors it is usually more or less irrelevant. Chart technique says nothing about the long-term future of a project. It does not include innovation ideas, fundamentals or the technology of the project. Broken down, chart technology primarily provides information about the possible short-term future of an investment. It should by no means be the determining factor for long-term investors. However, it can indicate whether the project is in a bull or bear market.


How do I rate cryptocurrencies?

you can also focus on the team in your research. The backgrounds, former employers and visions of the team members can provide information on how problems are tackled in the project or what the future of the project should look like. In addition, team research reduces the risk of being caught in a scam.

In conclusion, even the most intensive analysis cannot protect you from general market situations. However, it can minimize total losses in the portfolio and increase the chances in the bull market.

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