Undoubtedly, many are familiar with the idea of cryptocurrencies and the high prices some of these digital coins are going for. Though there is ample market opportunity for investors, knowing which cryptocurrency is best for your financial goals can be challenging. Here are some key factors to consider when selecting crypto to invest in.
The online community and public opinion surrounding a cryptocurrency can offer a crucial insight into the sustainability and success of that token. Because cryptocurrencies and NFTs do not fluctuate in value based on traditional economic factors such as the stock market or fiat money inflation, investing in crypto can help diversify your portfolio. However, as with any investment, there are always risks, and with crypto, the risks are higher than in other investments. The community surrounding a token is a great indication of the long-term success of that cryptocurrency.
Market Cap and Supply
The market cap of a cryptocurrency is an essential factor when considering which crypto to invest in. The market cap will give you direct insight into the value of the investment you are making and can offer room for speculation about the future value of the token. As the crypto continues to be mined, other questions can impact the future valuation of this coin. Is there a fixed amount of the currency? How much is currently in circulation, and how much has yet to be mined? As the demand for a cryptocurrency increases, the market cap does not, so the value of each unit must increase. This is a significant investment consideration for both long-term and short-term investment strategies. You can keep up with market cap and supply through a crypto platform such as FTX, which offers new investors a wide variety of resources and learning guides on bitcoin for beginners and other investment options.
Finally, considering each cryptocurrency’s actual use cases and white paper details can strongly indicate which coin is best for your financial goals. A crypto white paper details the purpose behind the development of the crypto, what technologies it will utilize, and what problems it is trying to solve. This will also include how the coin is intended to be used. The more use cases for a currency, the greater utility and value that crypto will generate.
Long-Term Investment Options
When selecting the cryptocurrency best for your financial goals, you may consider the long-term investment options with that crypto.
Some cryptocurrencies are run on proof-of-stake model blockchains that allow coin holders to earn rewards by staking their crypto. Proof-of-stake blockchains such as Cardano and Bitcoin are less likely to experience network attacks and require less computing power, making them more sustainable than the alternative proof-of-work models. With proof-of-stake, any coin holder can turn their personal machine into a node on the blockchain and stake their crypto as collateral for a chance to be selected to verify transactions on the network. The more coin staked with one node, the higher the probability that the node will be randomly chosen to verify transactions. As the node successfully verifies blocks, all coin holders in the pool will receive a share of the rewards.
Also read: Future of Cryptocurrency in Pakistan
Yield-farming or liquidity farming is a similar way to earn rewards using your crypto. The coin you invest in should have a substantial yield farming structure behind it so you too can participate in this high reward opportunity. When you join a liquidity farm, you lock your investment in for a certain period through a smart contract, and your coins are then lent out to borrowers. As with traditional lending, there are always risks involved for lenders and borrowers, but successful yield farming can prove highly lucrative. You can check the health of a liquidity pool by the TVL (total value locked) in the pool. The more value locked, the higher the chances of successful farming.
Investing in cryptocurrency can be highly lucrative to many but comes with its own array of risks and challenges. Start researching what cryptos are available to you today and begin your investment journey. Read more about cryptocurrency exchange platcorm.