With so many options for cryptocurrencies out there, choosing the right coin for your next investment can be overwhelming. This gets even more daunting for new investors with zero knowledge and experience in crypto investing.
Well, the best way to choose the right crypto investment is to compare different cryptocurrencies. But, again, the question is which coins do you compare? How do you select good, legitimate cryptocurrencies from hundreds of options in the market? Well, this article is here to help you do just that. Here, we talk about the process of selecting the right cryptocurrency through research and due diligence.
How to compare and choose the right cryptocurrency
1. Research and shortlist
At the time of writing this article, there are more than 12,000 coins listed on the Coinmarketcap website. So, choosing one or two cryptocurrencies for investment would not be easy. Well, to solve the problem, you can take a look at the coins that are trending and the ones that are the biggest gainers on the website. This will give you a good idea of what coins other people are investing in. Besides that, you can also consider investing in top cryptocurrencies like Bitcoin, ETH, DOGE, etc. based on the market cap and popularity.
2. Read about the crypto
The best way to distinguish good cryptocurrencies from bad ones is to learn in-depth about the coin you are planning to invest in. By asking a number of basic questions about the project, the coin, tokenomics, value proposition, object, goals, technology, development, investor benefits, etc. All this information and more you can find in the project whitepaper.
If there is no whitepaper available or the whitepaper is not clear or impressive enough, that’s a red flag for you.
Generally, cryptocurrencies with a clear and useful purpose will be worth your attention and money.
3. Research the team
The next thing you need is to research the team behind the coin and the project. The stronger the team, the more likely the project is to be successful. Look closely into the team - who are the people behind the project, what is their experience and knowledge in the industry, are they credible, and so on. Besides, learn about the launch and promotion of the project and the team’s network of participants and angel investors. Are any institutional investors showing interest in the project?
4. Coin’s market cap, supply and price
Other things to consider when researching a coin for investment include the cryptocurrency’s total market cap, its supply dynamics, distribution, launch price, and sale price.
How many coins are there and what is the current supply? How does the team plan to deal with high supply and low demand? What factors affect the coin price? Are there any real assets to back the coin price or is it just based on hype?
5. Community and investor benefits
Lastly, look into the coin’s community. What kind of people are investing in and trading the coin? Are there any institutional investors or companies or national banks showing interest in the coin?
Also, learn about the ways the coin can benefit you as an investor or user of the project/product.
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