We are in the middle of the greatest speculative frenzy of our lives. The media has been on fire with articles and talks about monstrous profits in cryptocurrencies. Small investors, some of whom start with less than $ 1,000, have become millionaires in the last year. Larger investors, like the Winklevoss twins (formerly famous on Facebook), have won billions risking much more.
Now, with Bitcoin hovering around $ 11,000, investors are eager to find the next cryptocurrency that makes them millionaires. With more than 900 active options and hundreds (if not thousands) more initial offers of currencies (ICO) in process, choosing winning investments has become very difficult.
Here are five ways to increase your chances of finding the next bitcoin.
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1. Monthly volume
Trading volume is a crucial method to identify winning cryptocurrencies. Think of choosing profitable currencies and tokens as a popularity contest. The more enthusiasm and potential a currency has, the more investors it attracts. Volume often breeds volume, and speculation becomes a self-fulfilling prophecy, which raises the price.
Cryptocurrency investors often use sites such as CoinMarketCap to identify the best monthly volume rankings. See the top 25 best ranked cryptoactives to start your search for a winner. Make no mistake, the volume does not mitigate the risk, but reveals the popularity of a particular currency.
Of course, the coins classified among the top 25 leaders of monthly volume can be winners. However, they are too speculative for my taste.
Buying new entries in the top 10 volume leaders is a tactic that can be used to capture gains in this game. When a currency enters the top ten for the first time, it means there is enough interest to push it into the ranking, but it may still be relatively unknown to the masses. For example, recently a currency called EOS entered the ranking of the top 10 volumes. Due to the increasing volume, I have added this coin to my watch list as a possible candidate to buy.
As in regulated financial markets, momentum can cause higher price increases in the cryptocurrency. Buying coins that are rising in price makes sense if you do it intelligently. After all, this is a tactic used by many professional traders in all financial markets.
Again, you can use CoinMarketCap to identify winning cryptocurrencies during the last seven days and 24-hour periods. The way I choose the coins is to observe the 10 highest performing currencies in the last seven days, then look for these same currencies in the top 10 during the last 24 hours. For example, at the time of writing this article, Grimcoin was among the top ten winners of the previous seven days with a performance of more than 1,700%. Grimcoin was also among the best winners in the last 24 hours with a performance of more than 140%.
Grimcoin’s continued upward trend aroused my interest in looking more closely at her. But volume should always be a primary consideration, and Grimcoin’s was abysmal, so I dismissed it as a possible investment. The next day, Grimcoin suffered the biggest losses, with a 50% cut in the price. Proven point.
3. Does it solve a real-world problem?
There are many coins and tokens that do not have a real world function. The Grimcoin website, for example, is more like a video game than a real investment thesis.
Bitcoin acts as an alternative currency and is slowly gaining acceptance among major retailers. This acceptance in the real world helps support the increase in volume, momentum and rising prices.
Ripple is an excellent example of a cryptocurrency that solves a major problem in the real world. The Ripple protocol facilitates the transfer of fiduciary money around the world in a fast and highly profitable manner. Scheduled to potentially replace SWIFT’s international bank transfer network, giants such as American Express and the Bank of Japan are experimenting with the implementation of Ripple.
Multiple cryptocurrencies solve real-world problems and / or have applications in the real world. Smart contracts, healthcare applications and even the decentralized nature of the blockchain itself are just some of the solutions and applications behind cryptocurrencies.
Make sure that the investments you choose solve a problem or have an application that makes sense and can generate long-term value.
4. Creators / Management
Each cryptocurrency has a creator and / or an administration team for the application on which the currency is based. As with actions, this team is often critical to the success of the project.
If possible, always check out the creator and / or team responsible for the launch and administration of the application that supports cryptocurrency. A good management team should look like a successful company: look for relevant experiences and past achievements.
The creator of Bitcoin wisely implemented the shortage in its design. There will be only 21 million bitcoins in existence, a fact that has surely helped the long-term upward price trend.
When considering an investment, make sure there is a self-limitation function or managed control of the cryptocurrency supply.
Is it safe to invest in cryptocurrencies?
Investing in cryptocurrencies is extremely risky. High volatility, unproven nature and the potential for exchange / hacking failures create a dramatic risk of quickly losing all your investment. Even if a popular cryptocurrency fits all the above factors, this does not mean that it will succeed in the market. Just invest the money you can afford to lose!
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