✔️ Information reviewed and updated in December 2023 by Eduardo López
Cryptocurrencies will undoubtedly be one of the innovations that we will see the most grow and grow in the following years. And it is that, with how revolutionary its technology was and the more and more followers of it, we should not be surprised that cryptocurrencies will soon flood the market.
Today, it is estimated that there are more than 1,000 cryptocurrencies in circulation which have sprouted in a matter of seconds like the grass does after the first rain. With so many options on the market, choosing the best one will soon become an adventure, that is why here we will tell you how to do it.
Why is it important to choose a cryptocurrency?
Learning how to choose a cryptocurrency turns out to be more important than we think, since here, our money is at stake. Just imagine that you choose the wrong currency and that it is worth zero overnight. Goodbye to your money!
Not only your money is at risk, but also your safety, as many cryptocurrencies turn out to be a form of scam. Security and not losing your money are the main reasons why it is necessary to take into account the following points.
How do cryptocurrencies arise?
Cryptocurrencies generally arise through AirDrops or ICOs, depending on the type of project. At the beginning, they appear as Token which are delivered in the form of a reward to attract users and generate income that allow, in turn, to launch and list the final cryptocurrency.
This makes cryptocurrencies emerge very quickly, practically thousands in just one year. In this way, it is estimated that around 10 cryptocurrencies will be in circulation in just one year. Along with that ease, its growing use suggests that there will be millions of cryptocurrencies by the end of the decade.
How to choose the best cryptocurrencies?
- Analyze the project
Behind every cryptocurrency there must be a project which supports both the cryptocurrency and its usefulness and value. This project is written in a document which is known as the white paper, and it is generally written in English.
Analyzing the project behind the cryptocurrency turns out to be very important, since this is the basis of all virtual currency. The white paper allows you to know how cryptocurrency works, as well as the people and organizations behind it In order to do so, verify if it is authentic and reliable.
- Look at the capitalization of the cryptocurrency
In another post we show you how the capitalization of the cryptocurrency is determined and why it is so important. Experts know that the purchase of a virtual currency does not depend on the value of the currency but on the capitalization.
Generally, the capitalization is calculated by multiplying between the price of the cryptocurrency and the quantity that exists in circulation, although the potential amount of coins that will be in the market is also used. Paying close attention to capitalization will let you know if the coin is over or undervalued.
It is very important to pay attention to liquidity, as it can affect cryptocurrency operations. For example, having a cryptocurrency with very low liquidity can make the spread very expensive for us to operate.
Looking at the liquidity of the cryptocurrency is relatively simple, since it is the same operator or broker that usually gives this indicator. We recommend that you pay close attention to this number as liquidity can also affect its price. Ideally, opt for the most liquid currencies.
- Cryptocurrency size
They say that size does not matter, although in cryptocurrencies this is the other way around, since the size of the community does have an influence. According to experts, it is advisable to opt for cryptocurrencies with large communities over cryptocurrencies with 2 or 3 people behind.
A large community offers much more support and validation when it comes to operating, as well as giving more certainty to people. Coins with small communities are usually much riskier when investing. So if you want to play it safe, you better go for what has already been tested.
- Broker number where the cryptocurrency is listed
Another way to validate if the cryptocurrency is reliable or not is in the number of the broker where it operates. A virtual currency that is trustworthy will be on the best virtual currency platforms on the market.
If you see that a cryptocurrency is difficult to access or that it is only available from an unreliable broker, then be careful. Considering this point can save you from falling for a scam or a cryptocurrency developed just to get money and disappear. It also lets you know if the broker is trustworthy.
- Experience of other users
The experience of other users, believe it or not, can be a good indicator to know if that cryptocurrency is a good idea or not. But we are not referring to the experience of users, but rather, to that of experts in cryptocurrency investments.
Today, it is possible to access this type of information thanks to the internet, since there are a large number of reviews telling us how was the experience investing in said currency. They are even a good way to spot potential scams or SCAMs.
Finally, and although this is a bit tedious, we definitely recommend that you pay close attention to statistics and analytical data. This is because many times, Financial indicators can be more revealing than we expect, even for those of us who are beginners in cryptocurrencies.
Although it might sound difficult, there are always beginner ways to analyze data that could help us. These indicators could give small indications when it comes to knowing if that cryptocurrency is reliable or not, if it will rise in price, or on the contrary, it will fall., among other types of data that help us make conclusions and decisions.