10 Simple Steps To Identify The Right Crypto Investment

You’ve probably heard of the insane gains some people have had investing in crypto. And so, you’re wondering “how do I invest in the right cryptocurrencies that go to the moon rather than crash?”

In this guide, I’ll be sharing 10 simple tips to help you uncover the next crypto gem. Some of these steps are so basic you should be able to complete them just by browsing the website of the crypto coins you are thinking of investing in.

However, be careful of thinking that you can’t invest in a coin that has already seen huge gains. Using this process, you can evaluate if there is still an upside to investing in it. Because sometimes investing in known cryptocurrencies can yield better returns than investing in unproven ones.

Pro tip: When evaluating a coin to invest in, go in with the mindset of looking for reasons why you should not invest in it! This prevents you from developing a confirmation bias, where you are looking for information that encourages you to buy. This way, the information you find should be so good that it convinces you to change your mind that the coin is a great investment.

Steps You Can Complete On the Crypto Coins Website

What does it do?

What service does the cryptocurrency offer? For example, when you go to your favourite restaurant or pay for anything online you use your card to pay. Your transaction is processed by companies such as Visa and MasterCard.

Solana is a cryptocurrency looking to replace these companies on the blockchain with its technology. So, when evaluating a coin, you should determine what exactly it can be used for. Also be careful of cryptocurrencies that claim that they can do it all.

Some examples:

• Polkadot aims to link all the cryptocurrencies to each other
• ChainLink aims to provide data from the real world to other cryptocurrencies
• Ethereum aims to be the base layer for all financial transactions

Ranking and how it plays?

Is it listed on any reputable exchanges? Or do you have to jump through hoops, climb rivers and mountains just to invest in it?

Digital Surge aims to provide you with a secure and trustworthy experience to protect you and your investment. And like any reputable exchange, we do our best to evaluate the coins we list on our platform to make sure the comply with our internal criteria to reduce unnecessary risk to our customers.

Where does the coin rank compared to its competitors and what is the trading volume of the coin? Coins with low trading volumes typically mean that no one is interested in the coin and usually point to a red flag.

Industry Disruption

What part of the crypto industry is it disrupting? Is it improving security, the number of transactions per second, or the fees per transaction? And how is it doing so?

For example, Helium aims to provide decentralised Wi-Fi hotspots by paying individuals to host routers in their homes or other location.

Value proposition and message

What is unique about the cryptocurrency? Have they come up with an interesting technology that will make transactions faster, improve security, or scalability?

You can usually find this on the cryptocurrencies white paper which should be linked on their website. If they do not have a white paper or it’s full of terms that are trying to confuse your rather than convince you, it’s a red flag.

Ecosystem

Who are the founder team, investors and key partners on the cryptocurrency? If the cryptocurrency is not clear on who the founders are or the ability they bring to the table, you can try searching for them on LinkedIn. If that doesn’t yield any result, consider it a red flag.

Reputable investors flock to good cryptocurrencies, so do your research on who has invested in the cryptocurrency. Are they also investors on other well-known cryptocurrencies or there’s no information about them online?

Do they have any key partners they are working with? If yes, who are they and have you ever heard of them? Some cryptocurrencies partner with companies like Google, and IBM this gives you an idea that the cryptocurrency is on to something.

The next steps require diving a little deeper, going beyond what you can find on the cryptocurrency’s website and navigating the internet:

Tech Developers

Developers flock to cryptocurrencies that they believe in and have a future. A quick glance at GitHub (a repository for tech projects), can show you how often a cryptocurrency has been updated. And this is usually a sign of the level of development going on with the cryptocurrency.

There are exceptions to this, for example when a cryptocurrency is first starting out, most of the development takes place behind the scenes. But if the cryptocurrency has been around for a while and there isn’t much activity on GitHub that can be a bad sign.

Tokenomics

Earlier, I mentioned that a coin’s price is usually determined by its demand and supply dynamics. Take Bitcoin for example, there will only ever be 21 million coins mined. This means that its supply is limited, and this makes it an attractive investment for investors looking for a store of value.

There are coins however, that have an unlimited supply of coins and issue new coins regularly. This means that for the price of the coin to go up the demand for the coin must far outpace the rate at which new coins are issued in the market.

Growth and longevity

Is the rate of adoption of the coin increasing and how long has it been in the market? It is extremely easy for a new coin to enter the market see a huge pump in price and then fizzle out.

So, while it might seem like a good idea to jump in early on a cryptocurrency, it can also pay off to hold off and evaluate a coin over a period of time before investing in it.

Risk

What are the risks associated with the cryptocurrency? A huge risk for new cryptocurrencies is getting developers and other market participants to adopt the coin. With 1,000’s of cryptocurrencies out there, the competition is really fierce.

Some cryptocurrencies like Ravencoin try to mimic the real world by using what’s called a Proof of Work mechanism (PoW). Like how minerals such as gold are mined to increase their supplier, individuals like you and me can use specialised systems to ‘mine’ coins.

The risk here is that like the physical world, miners will only mine minerals they find profitable. So, if a coin uses PoW but the value of the coin is so low that it’s not profitable to mine, miners will go mine cryptocurrencies that are more profitable.

This could lead to an insecure network for the cryptocurrency and a reduction in its adoption and therefore crashing the price of the crypto coin.

Price Prediction

Be careful with this one, because there are many bad actors out there that pump coins. So, while doing your research try saving this for last. This way you’ll be able to figure out whether the price predictions you find are reasonable or not.

So, if you notice a coin has really high inflation (an infinite supply of coins), and you see a prediction saying that it will 100x in 2 years, that’s a red flag that a pump is going on.

Remember you are trying to build wealth the smart way not gamble. If you lose 90% on a coin investment, you need to find another coin that will grow 1000% to recover your investment.

You want to become a savvy investor not a gambler, so invest wisely!