Table of Contents
Cryptocurrency investors are spoilt for choices these days. Just a few years ago, there were limited projects, tokens and protocols to choose from. But since then, the world of crypto has exploded and almost every day, new tokens are launched into the market. In such a situation, it becomes important to learn about crypto before investing in it.
Because if you invest before you learn crypto and what are the best practices or the things to consider, then the chances of making any profits go down drastically. So, if you do not want to miss out on making huge profits, then read our detailed guide below, where we give you the best tips for choosing a cryptocurrency to invest in.
By Market Capitalization
Whenever you are looking for a crypto token to invest in, the first thing to consider is its market capitalization. It is the dollar value of its circulating supply at the current price. The high market cap crypto tokens are ranked higher and are considered to be relatively less volatile.
But that does not mean that low market cap coins can’t be used to earn profits. In fact, it is the low caps that have the most upsides and can easily do 1000x in a short amount of time. So, it is important to diversify your portfolio and invest in large, mid and small-cap cryptocurrencies.
Value for Money
The next important tip for investing in cryptocurrencies is to look for the tokens that will give you the maximum value for the amount of money that you are willing to invest. This is important because, depending on your starting capital, you can choose from a lot of different options.
If you have less capital to invest, then going for high-risk but also high-reward crypto assets is the right thing to do. But in case you wish to invest large sums of money, then it is better to go for low-risk, low-reward assets, like BTC, ETH, etc. Moreover, value for money depends on your chosen method, as shown below.
For Crypto Investment
When you are looking to make an investment in crypto, it is not for the short term. Rather you want to do it for a long-time and not be worried about your position. In this case, it is better to go for highly ranked crypto assets, such as BTC, ETH, SOL, XRP, DOGE, etc.
This is due to the fact that even though they also carry risks associated with them, the chances of them losing value dramatically are less. Historically their price has shown to recover much better. So the chances of making a profit increase manifold.
For Crypto Trading
Trading cryptocurrencies can be of many types, such as spot, derivatives, day trading, scalping, etc. So, depending on your preferred trading style and initial capital, you can invest in any token of your choice by understanding the fundamentals of technical analysis.
Trading is risky, but if done correctly, it has the potential to earn hundreds and thousands of dollars on a daily or weekly basis. There are technically no good or bad tokens for trading as long as you take regular profits out of them.
Based on Analyst Opinions
Over the years, the growing popularity of cryptocurrencies has resulted in a boom in the number of traders and analysts giving crypto investment tips online. You can come across such videos all over social media, YouTube, etc.
While there are good analysts out there, it is also important not to trust any piece of advice that you come across on the internet, especially when it comes to making investment decisions. Hence, go for analysts that supplement your research and then make your investment decisions based on the best information available.
By Market Niche
The cryptocurrency market is diverse and contains within it a large number of niches, such as DeFi, Layer 1, Layer 2, NFTs, Play-to-earn, meme coins, metaverse tokens, etc. The public interest in these niches varies from time to time.
Hence, it is very beneficial to invest in narratives that are gaining popularity at the moment and invest in them. For instance, DeFi tokens soared in 2019-20, and it was known as DeFi summer, whereas meme coins skyrocketed in early 2020, followed by NFTs in 2021.
Conclusion
If you are an investor, then the best strategy is to diversify your portfolio. The diversification should not be merely between different cryptocurrencies, rather it should be among various asset classes, such as gold, stocks, bonds, crypto, etc.
Traditional assets could be used to make safer investments and be used as a hedge against inflation. Cryptocurrencies present a once-in-a-lifetime opportunity to make huge profits if the investment decisions are based upon the tips mentioned above.