How to choose a cryptocurrency for purchase: signs of prospects

The choice of promising investment objects always begins with an analysis of the market and its needs. The reasons for the failure of cryptocurrencies ultimately come down to one thing: the currency cannot offer the consumer anything that he needs.

There are three factors that influence the market success of a cryptocurrency:

• Demand for technology. Crypto money requires improvement in various areas, and society reacts with interest to every technical innovation. The currency in which a significant improvement is implemented has a high chance of getting into the top.
• Possibilities of practical use. Nobody needs a currency that has nowhere to go. It should be easily exchangeable for fiat money, or at least other currencies such as bitcoin or ethereum.
• Confidence. The cryptocurrency market is initially not the most stable phenomenon, which is not regulated by anything and does not provide any guarantees. Any hint of stability under such circumstances instantly lifts the currency a few notches higher.

Another factor that can make a currency successful for a short time, but, unlike those listed, is groundless, is hype.

If a cryptocurrency meets the above three criteria - high-tech, practicality and reliability, then the probability of an increase in the rate is huge, if two - it is great, if one - it is essential in order to consider it as an object for investment, but additional research is required.

In the latter case, it is worth focusing on the following criteria:

• Capitalization

The greater the capitalization, the more difficult it is to collapse the currency on the market. Provided that the capital is distributed among a large group of people, and not concentrated in the hands of a couple of people.

• Turnover

Cryptocurrency must be traded on the market. The turnover of a currency in the top 100 is basically a few tens or hundreds of thousands of dollars, occasionally the account goes into millions, rarely into thousands. It makes no sense to invest in a currency whose daily turnover is $100 and which has not yet emerged.

• Time of existence

If the cryptocurrency appeared recently and has already hit the top 100, you need to analyze what provoked the rise. 90% it's a scam. But there is a possibility that it is based on an innovation that the developers failed to properly advertise, but which knowledgeable people immediately noticed. This is the case when you can "catch" a promising currency at the dawn of its popularity.

• Chart of exchange rate fluctuations

Cryptocurrencies are suspicious, the rate of which has risen and collapsed several times. If one collapse can be explained by chance, then two say that a third can happen, and three or more — that you don't need to invest a lot of money.

See also: Choosing a cryptocurrency exchange for trading