The cryptocurrency market is highly volatile, with new assets appearing weekly. Investing in cryptocurrencies requires thorough research and analysis.
 |
Unlike paper market stocks, investing in cryptocurrencies lacks systematic research reports that determine profits, losses, revenues, and cash flows.
Cryptocurrency investors should exercise caution, conduct additional research, and anticipate market volatility.
Basic steps to consider before investing in cryptocurrencies.
The basic and important steps are:
1. Understanding the token economy and supply.
Token economics is the study of supply and demand for cryptocurrencies, often known as token economics. With enough demand, the price is expected to rise over time, making it a deflationary asset. When comparing cryptocurrencies, it is important to consider whether the supply is finite or endless.
Crypto assets like Ethereum, Solana, Polkadot, and Dogecoin can be considered inflationary due to their unlimited production if demand lags behind supply, causing prices to fall over time. Cryptocurrencies like Polkadot and Solana aim to maintain controlled inflation rates of 10% and 8%, respectively. Some cryptocurrencies, such as Ethereum, can be non-inflationary or even deflationary in practice because they burn off a portion of the fees paid to “miners.”
2. What is the purpose of encryption, and who uses it?
When evaluating cryptocurrencies, it is important to consider their purpose, connected platforms and applications, trustworthiness, and potential success. Cryptocurrencies that do not fit these three characteristics may increase in value, but this is due to speculation, not investment. It is also very volatile and can collapse as quickly as it rises.
Number of users. To determine the usage of crypto assets like Bitcoin, Litecoin, Dogecoin, and Bitcoin Cash, consider the number of active users, which can be found on sites like BitInfoCharts. Cryptocurrency pools may be linked to a platform, such as a blockchain-based video game or cryptocurrency exchange, that has users. It is important to check data regarding the platform's usage and growth rate.
Total Locked Value The “total locked value” of cryptoassets on general-purpose blockchains like Ethereum and Solana is a basic indicator of their validity. This number represents the value of assets stored by blockchain applications.
3. Learn more about crypto assets from reliable sources.
It is not difficult to find people who have an opinion about investing and trading in cryptocurrencies. There are many competing voices, but who are these people who you can listen to and act on their opinions, and can they be trusted?
4. Follow technical indicators such as the Relative Strength Index and moving averages.
Due to the constantly changing indicator charts, relying on them too much may be risky. However, some technical indicators may sometimes indicate a high probability that the cryptocurrency price will move in a certain direction, either up or down.
The Relative Strength Index (RSI) measures the average price gain and loss over a given period and ranges from 0 to 100, where 0 indicates oversold and 100 indicates overbought. The Relative Strength Index (RSI) can indicate the right time to buy or sell a cryptocurrency. If the index is above 70, this may not be a good time to buy. If the index is below 30, the original price may be lower than its original price.
The most closely watched moving average is the 200-day line; if the asset price is above it, the market is considered bullish, and if the price is below this line, it is considered bearish. It may also be useful to compare the short-term average of the cryptocurrency with the long-term average. Some investors consider it important when an asset's 50-day average rises above its 200-day average; this is known as a 'golden cross', and may signal the start of a new rally.
5. Things to understand before buying and trading crypto assets?
It is important to know where crypto assets are trading before you buy them so that you have important insight into the depth and quality of the asset market.
Investing in cryptocurrencies on less popular exchanges can be risky due to price manipulation by traders and the possibility of fraud. It is recommended to list crypto assets on several well-known platforms for better trading opportunities.
Comments
Post a Comment