Investing in cryptocurrencies seems to be easy, but quite complicated. There is no magical incantation to become a successful investor other than following some laid down investment rules. This article has compiled two important things to consider when choosing an investible cryptocurrency.
Check the Circulating Supply of Cryptocurrencies
It is important to understand that some cryptocurrencies respond to change faster than others. There is no better way to identify such assets than their circulating supply. Cryptocurrencies with smaller circulating supply rise and fall faster in response to change in market capitalization than cryptocurrencies with larger circulating supply. This will be well understood in a few examples.
First, the price of a digital asset is calculated by dividing the Market Cap by the circulating supply. In this case, the market cap needs to equal the circulating supply in size to trade at a dollar. It needs to double the circulating supply to trade at $2 and so on. This means assets with smaller size of circulating supply trades at a dollar and multiply in price faster than the others.
XRP has a circulating supply of 43 billion, but trading at a current price of $0.14 despite the fact that it has a market cap of $6 billion. Meanwhile, Dash is trading at a current price of $42 with a market cap of less than $500 million. It has a higher price compared to XRP despite the smaller market cap, just because its available supply is just $9 million. It is important to consider the size of the circulating supply of a digital asset before adding it to your portfolio.
Check the Team Behind the Cryptocurrency
This may seem not important, but it’s a very critical factor to consider to avoid buying any trash in the market. Most cryptocurrencies were created for fun, and have no future. Some have also been given up on by the team, and their prices are mere products of speculations. Before making any decision of buying a cryptocurrency, find out the team behind the asset, and check their portfolios to be convinced whether they have what it takes to manage the project. Also, visit any of their social media pages to check their last updates to make sure that the project is still alive.
To avoid buying any scam asset, and to buy the right assets for value in the future, it is best to consider the above suggestions.