How to determine if a Cryptocurrency is overvalued or undervalued

Table of Contents

• Conclusion on how to determine is a cryptocurrency is overvalued or undervalued

     Cryptocurrency acceptance is on the rise, and investors from all over the world are looking at investing in cryptocurrencies. Cryptocurrencies are volatile in nature, and it is necessary to gauge the potential of a cryptocurrency, and its underlying project before investing in it. New cryptocurrencies are launched on a regular basis, and you must know how to determine whether a cryptocurrency is overvalued, or undervalued. 

     We have made the process of determining the same easier for you. Here is how you can determine the apparent value of a cryptocurrency. 

How to determine the Value of a Cryptocurrency

     Cryptocurrency prices are dependent on supply and demand, the hype revolving around a cryptocurrency of interest, and the promise of the latest innovative technology, among other dependencies. With the number of scams, and failed projects on the market to show for, it is quite difficult to gauge the potential of a cryptocurrency. 

     While there is no way you can accurately predict the futuristic price of a cryptocurrency over a period of time, you can determine and evaluate whether it is potentially undervalued, or overvalued by gauging certain criteria. Here is how you can determine the potential value of a cryptocurrency – 

1. Visit the cryptocurrency’s website, and go through its whitepaper, roadmap, underlying project, product release dates, and future plans, among other insights into its underlying project. A good project will give you detailed information with respect to the same. It must be noted that some projects have copied the above mentioned information from other projects, taken people’s money, and absconded - you must perform your due diligence, and ensure that you do not suffer the same fate. Once you think that a certain cryptocurrency is worth trading, check out if your broker features on its trading platform.

2. According to bitcoin profit review 2020, the second most important things to look at the developers, creators, and management team of a blockchain project. Some projects of the past have ‘employed’ people who have no connection to the project, in the quest of enticing people to invest in their cryptocurrency – projects of this nature have suffered greatly, and so have the people connected to them. A reliable team will work towards building a great project, which in turn could speak wonders with respect to the value of a coin.

3. You must figure out the markets upon which the cryptocurrency in question is being sold. Initially, a cryptocurrency is listed on only one, or a few markets. As and when its stock rises, it is listed on an increasing number of markets. Greater is its trading volume, better are its prospects.

4. Look at the price history and stability of a cryptocurrency. If it manages to stay stable over a period of time, surviving the hype that was initially around it, it is a good sign.

5. You must also figure out whether the cryptocurrency’s underlying project is affiliated with any major companies, or institutions which could help the project in due course of time, and accredit the cryptocurrency. 

6. You must be able to understand the underlying technology of a cryptocurrency. Cryptocurrencies which have real world applications, are likely to last the tryst of time. According to wallstrategies’ crypto guide, there are only a very few cryptocurrencies that can deliver up on this promise.

Conclusion on how to determine is a cryptocurrency is overvalued or undervalued

     While there is no way to accurately determine the value of a coin, you can do your bit to figure out its apparent value. You must follow the above mentioned steps, and perform your due diligence at all times. Cryptocurrencies are not regulated by a higher authority, and this has led to several scandals over the years.

     Some projects are worth investing in, while others must be kept at a distance. Remember -do not ride the wave of hype revolving around a cryptocurrency, without having conducted research.