Since the launch of Bitcoin in 2009, the number of cryptocurrencies available on the market has grown exponentially. In fact, there are almost 13,000 cryptocurrencies in circulation today according to one estimate! While stories of bitcoin billionaires are enough to get that blood pumping, the sad truth is that for every success story, there are thousands of failures, with many wannabee cryptocurrencies falling by the wayside shortly after their launch. But what, exactly, should you be on the lookout for when trying to track down the next big thing in cryptocurrencies? Here’s our guide of the most important considerations to bear in mind when deciding which cryptocurrency to invest in.
1) Price history
By their very nature, cryptocurrencies are volatile creatures which are susceptible to massive fluctuations in price. This is usually caused by an absence of regulatory oversight, the sharp bursts in popularity caused by mass hype and the cynical profiteering of pump-and-dump schemes. By looking back over a cryptocurrency’s price history, you can see if it has been plagued by excessive volatility in the past and make a decision on whether or not to invest accordingly.
2) Total supply
The laws of supply and demand are among the most basic tenets of business. Things are no different when it comes to cryptocurrencies, either. Bitcoin has built its runaway success due to a variety of reasons, but the cap of 21 million coins is certainly one of them; as the number of available coins diminishes, their value increases. By contrast, those cryptocurrencies with no supply cap may struggle to appreciate in value significantly, since there will always be a plentiful supply.
3) Developer involvement
A healthy cryptocurrency is one which attracts significant interest from the world of developers. Their input is vital for fixing bugs and issues with the code, bringing out new iterations of the cryptocurrency and basically ensuring it stays relevant and competitive in an increasingly saturated market. You can gain an overview of developer activity by visiting Github, where all projects and the metrics associated with them are freely accessible by the public.
4) Eco-friendliness
Despite the monumental success of Bitcoin, one of the biggest criticisms levelled at it is its damaging impact on the environment. Indeed, the massive amounts of processing power required to verify transactions on the Bitcoin blockchain mean that the cryptocurrency consumes more energy than many entire countries, which makes it vulnerable to criticism in a world where sustainability is playing an ever-greater role. As such, seeking out an eco-friendly option could futureproof your investment going forwards.
5) Community size
As a general rule, a cryptocurrency with a larger community around it is more likely to succeed in the long term than one with a smaller following. Just as important as its size, however, is the involvement of those community members. Are they actively engaged? Visit the currency’s social media pages (Twitter and Reddit are especially good barometers of public opinion and engagement) to see whether people are talking about it – and more importantly, what they’re saying about it.
6) Accessibility
Although deciding which cryptocurrency to invest in is entering the mainstream market nowadays, it still requires a modicum of technical knowledge. Those currencies which make it as easy as possible for people to buy and sell them are better equipped to last the test of time than those which are complicated to understand, awkward to use and tricky to track down. Of course, a currency which isn’t widely available isn’t necessarily a poor investment, since it might just mean you’re getting in on the ground floor – but make sure to do your research prior to making a deposit.
Weighing up the abundance of options when it comes to investing in cryptocurrencies can seem similar to navigating a minefield. However, as long as you take your time to understand the ins-and-outs of the commodity and keep the aforementioned points in mind, you should be able to make sound investments and learn which cryptocurrency to invest.
