Cryptocurrencies have proven to be among the most effective trading assets in the financial market. Although it wasn’t the original intention to create a trading instrument, the development of blockchain technology, and digital money as a consequence, has taken the trading market by surprise.
According to the data from all the way back to 2018, there were over 1,800 different altcoins you could choose from. And it’s pretty obvious that you cannot possibly choose and keep track of all cryptos, there’s practically no point in doing that.
Therefore, you have to decide which ones to trade during our trading endeavors. And in order to do that, you need to conduct a pretty thorough market analysis, observing some of the most prominent digital coins and monitoring their performances in various exchanges.
In this guide, I’ll help you leave no stones unturned when looking for your ‘perfect’ cryptocurrency. And rest assured that by the end of the article, you’ll have a full-fledged roadmap for finding one.
Check the market capitalization of the coin
One of the very first things you have to look at when choosing your crypto is its market capitalization. What is market capitalization? It’s the total value of the asset/company that’s being bought and sold in the market.
By monitoring the market cap of your preferred cryptocurrency, you can get pretty valuable information about the way it’ll perform in the market. For instance, if the crypto has a high market cap, it means that it’s also going to be more liquid and more actively-traded, which will allow you to hoard on it and trade it more intensely, as well as in larger amounts. Yet a coin with a low market capitalization can indicate lower popularity and lower public trust.
Checking an asset based on its market capitalization isn’t an exclusive feature for cryptos. In Forex, for instance, you need to do pretty much the same market research to find a suitable currency pair for your needs.
But there’s a bit of a difference in Forex. You see, people usually tend to trade currencies that are local or widely-accepted in their areas, and brokers that provide them fine-tune their offerings based on those preferences. As we can see in the XM no deposit bonus reviewed here, the conditions offered for this promotion are best suited for the EUR/USD pair - a pair most often traded in developed countries.
So, whenever you’re looking for your preferred cryptocurrency, start from its market capitalization; it’ll help you extract a lot of the information about the asset. As of right now, the highest market capitalization comes on Bitcoin, Ethereum, XRP, and Litecoin, so, investing in one of these assets can be a relatively reasonable decision.
Moving on, the next important thing you need to check out about your crypto is the usual volatility levels. Generally, the majority of crypto coins are pretty volatile but there are some that go way overboard in terms of price fluctuations.
Now, there are two sides to the coin you need to consider: On the one side, high volatility can increase your chances of yielding larger profits much faster than in any other market. And who doesn’t want faster and larger profits, right?
On the flip side, however, the same level of frenzied volatility can easily destroy your entire trading account. In one second, your prospects may be looking up and in the other, the price can dunk way below the previous rates, taking your budget with it.
So, it’s all about balancing these two sides of a coin and choosing a crypto-based on your needs. If you’re capable of withstanding the crazy price shifts and ensuing losses of Okschain or any other volatile cryptocurrency, you can certainly go ahead and trade it; but if you want more stable crypto, then you should start looking at stablecoins.
Speaking of stablecoins, lets elaborate on this subject a little bit more. First things first, what is a stablecoin? Well, it’s still a cryptocurrency that is usually embedded into the blockchain, yet it has different characteristics that ultimately define its price.
Instead of its own supply and demand features, a stablecoin is pegged with a different asset and its price characteristics. For example, the USDT stablecoin, also known as Tether, is tethered (no pun intended) to the US dollar, so that the USDT/USD exchange rate is exactly 1.
What this means is that when investing in a stablecoin, you’re getting the best of two worlds. On the one hand, it’s still a blockchain-based coin with enhanced security and reliability, and on the other, it has price stability and predictability of a fiat currency.
So, going for a stablecoin can also prove more beneficial if you value things like stability and predictability in trading.
Everyone has different needs
In the guide above, I specifically noted that your crypto of choice should be the one that responds to your specific needs and wants. It’s your personal knowledge and experience in the market that determines the exact profitability of any trading asset, not just a cryptocurrency.
So, when you’re looking for a crypto asset to invest in, take those three aspects noted in this article and fit them into your trading routine. For instance, if you’re a risk-taker and want to trade in a frenzied rate, you should by any means go for volatile crypto and generate as many profits as possible.
And if you’re someone who appreciates more stability in their trading ventures, choosing non-volatile crypto or a stablecoin altogether can be more beneficial. Either way, you should make an asset work for you, not the other way around.