Investing in and profiting maximally from cryptocurrency is an excellent way to make money. Many people like you have become wealthy from investing in cryptos. If you earnestly desire to make money by stacking coins over time, you are on track.
However, you do not want to lose your money while investing in cryptos. Losing money from investing in cryptocurrency is possible considering the nature of the variables that drive the transaction. The logic of crypto is straightforward; if you do not invest wisely, regrets set in.
Therefore, it is imperative to consider these 5 factors below before venturing into cryptocurrency investment.
Without much ado, let’s dive into the factors straightaway.
- Comparative Advantage:
Comparative advantage as a factor to consider requires you to find out if the crypto you are interested in has any advantages vis-à-vis others. Ask yourself: That is, you want to know the future of such a coin. Determining the edge of such crypto over others puts you in a better position for sound judgment. The more comparative advantages a currency has, the more you can hedge your risk during unforeseen turbulence.
The most valuable crypto right now is probably Bitcoin, probably because it is the first significant crypto to hit the world. According to different views, Bitcoin came out as far back as 2003 or 2008.
However, Ethereum also has a better comparative advantage than many others because the platform is more robust and allows you to perform significant activities within the chain.
Look at it this way: cryptos run on blockchain technology the way a car runs on its engine. The strength of the car’s engine defines how strong such a car is or will be. In the same vein, the engine for cryptocurrency is blockchain technology. Cryptos generally run on the Proof of Work Protocol (PoW). PoW has its benefits and drawbacks. Among other things, Ethereum has a more robust PoW that allows people to carry out higher volumes of verified and secured transactions over the platform. That in itself is a much more secure futuristic view and gives you more confidence to invest.
Also Read: Why Invest in Bitcoin? 10 Reasons Investing in Bitcoin is Big Business.
But, other solid and reliable cryptos like Litecoin, Binance Coin, etc., exist. Whichever you intend to invest in, first of all, determine the comparative advantage of such a coin over others. The higher the advantage a coin has, the more you can make an excellent profit.
- Acceptability As a Means of Transaction:
It is called cryptocurrency. In other words, it is a means of payment or exchange for goods and services, or, at least, it should be considered as such. If, for instance, merchants and other service providers are not accepting it as a means of payment, that in itself calls for questioning. To consider investing in a coin, ask yourself- how many merchants accept such a coin as a means of payment for goods and services. The answer to that question will make you understand if such a currency is worth investing in or not.
A few companies, including Skynova, IncAfrica, HSB and many others, have conducted independent research to determine the acceptance of cryptos by small businesses, particularly in the USA. The survey concludes that one-third (1/3) or 36% of small US businesses accept crypto coins. Fortunately, these firms' private findings came up with a similar conclusion, which indicates a pointer for better decision-making. According to the research, 58% of merchants in the US accept Bitcoin, 36% Bitcoin cash (a subsidiary of Bitcoin), 35% Ethereum, 28% Litecoin, 24% Binance coin, etc. These figures are expected to rise with time. The above research gives you an idea of which crypto to invest your money in. You can further analyze the research findings to make an informed decision.
If people do not accept them as a means of exchange, why invest in them? The hype over such currency on social media notwithstanding, if it is not accepted as a means of transaction, consider that a red flag. However, you have to consider other factors, like the people behind crypto, etc.
- Growth Drivers:
You may have seen some cryptos hit the market and suddenly begin to gain prominence, particularly in value. But the rule of thumb lets us know that if anything goes up too fast its most likely to come down too fast. The vital question to find an answer to is: what is driving the growth of any currency?
Getting the correct answer will help you make an informed decision. For instance, if merchants drive the growth and accept it as a transaction means, that will be a great reason. On the other hand, if the increase is due to social media hype, as with some of the coins, it calls for a second thought.
Also Read: 7 Smart Online Businesses to Make Massive Money from
- A Robust White Paper (Prospectus):
Before considering investing in any cryptocurrency, you must study the white paper for that coin. Consider a white paper like a prospectus when buying a share from a company. It is called an Initial Public Offering (IPO), especially for companies soliciting the public to invest in their firm. It is necessary to request the white paper of any crypto. Every crypto should have a white paper, also known as a prospectus- Ethereum, Bitcoin, Litecoin, etc.
A white paper, in summary, tells you what a cryptocurrency hopes to achieve in the future with time allocated to every milestone the promoters have envisioned. It specifies those promoting such coins, who they are, what they do, etc. It defines the technology behind such crypto.
If a cryptocurrency does not have a white paper, kindly think twice before parting with your money to invest in it. A cryptocurrency without a white paper is akin to driving without a map and no direction; that is very risky. A white paper gives you a lot of information about exciting variables to help you make an informed decision.
- Historical Statistics:
Many sites can give you the historical perspective of any crypto you are interested in. Statista, coinmarketcap, towardsdatascience are a few sites that can help you with data for historical analysis of any cryptocurrency.
Historical statistics are vital because they help you determine any crypto of interest's growth pattern or trajectory. For instance, if the history chart of any currency within a year shows a steady rise with intermittent drawbacks, it is worth considering.
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