Crypto Basics
5 Golden Rules of Crypto Investing
How to choose a cryptocurrency project and check its reliability
Cryptocurrency offers advantages such as financial freedom and fast earnings, but there are also many well-known pitfalls. Here’s what every crypto investor should check before buying a new coin.
1. Examine their website and social media
Any company that is interested in its development takes care of the social media, website, and community overall. The website must be updated with recent data, has information pages, and be appealing to users. Pay attention to the usability, errors absence, and partnerships. Moreover, it’s important to check the information about developers and project owners. It must be clear and open to everyone.
The project team must have an active social media presence as well. There are three main accounts for the crypto industry players: Twitter, Reddit, and Discord. The major red flag is aggressive marketing. Avoid projects that promise you fast gain.
2. Read the white paper
Another significant moment concerns the White Paper. It’s the key tool that helps to analyze a cryptocurrency. The White Paper is a major document that determines the objectives and strategies of crypto. If the White Paper is missing it’s a big red flag. Usually, investors examine it before deciding to allocate money to a project. There you can also learn about the tokenomics of a coin: supply limits, the way it’s distributed between investors, and more.
3. Analyze the cryptocurrency’s market metrics and price history
You can use CoinMarketCap for it. Every good investor must know about these 3 metrics: market capitalization, trading volume, and supply.
It’s safer to invest in cryptos with a high market cap, however, it can’t guarantee 100% income. The trading volume shows the amount of crypto sold. A high volume means that many investors are buying and selling, which leads to more liquidity and price stability. Talking about supply metrics, you must understand the difference between maximum, circulating, and total supply. These do also affect a coin’s price.
Don’t forget to take a look at the price history. The analysis can help you understand the long-term and shorter-term price trends. Red flag: exaggerated highs followed by sudden drops.
4. Find out the purpose of the project
While reading the White Paper try not only to learn the technical side of the project but its vision and purpose too. Crypto beginners are usually stuck on the technical jargon of the document and can’t find out the general problem that the project is solving. Just read through the paper to get the main idea of the project. You should look not only for a problem but also for a solution.
5. Determine the amount of the investment
We suggest you evaluate your financial situation before investing in any coin. It’s an important rule to make trading and investing comfortable. Be careful and invest as much money as you can afford to lose.
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