More than 21,000 cryptocurrencies are traded on the market today. Among them are very large and notable projects. So how will investors distinguish a few good investments among so many projects? This article examines 5 common characteristics of a good altcoin project to hold, use or invest. Articles by Forbes are a guide to choosing the altcoins you should hold for the long term. Now let’s take a look at the factors you should pay attention to.
What benefits does the altcoin you want to invest in offer?
Understanding the benefit offered in an altcoin project is crucial. What problem does the project you want to invest in solve? If this question has a simple answer, the reason for using it will become clearer. For example, Bitcoin (BTC) started as a solution for online payments. The problem was largely that there were centralized payment service providers. If these providers froze customers’ funds, customers would have little or no return on losses.
Bitcoin was created by Satoshi Nakamoto after the 2009 economic crisis as a peer-to-peer (P2P) payment network. In the crisis of 2009, ordinary people witnessed the collapse of financial institutions that kept their funds safe. As a result, they lost their homes and their savings. Bitcoin was launched to solve this problem and gained great acceptance. There is a lot more insight to be gained from the growth of Bitcoin, but basically it works as a network that puts financial control entirely on the user. A good cryptocurrency needs a clear reason for use, like Bitcoin.
How many people are using the cryptocurrency project?
The number of users is an indicator of trust for altcoin projects. In the early stages of a cryptocurrency, it is likely to have several users. However, there is always a need to see clear growth over time. Bitcoin originally had only a few hundred users. These consisted mainly of people who contributed to its code and development. The first commercial transaction was made by Laszlo Hanyecz, who bought two pizzas for 10,000 BTC on May 22, 2010. 10,000 BTC was worth only $41 in 2010. Since then, every new user has joined the network for purposes such as payment, speculation or investment.
Other cryptocurrencies have seen this kind of development process as well. They gained users mostly based on their first interaction or entry to Bitcoin. In cryptocurrency trading, most trading pairs are tied to the two largest cryptocurrencies, namely BTC and ETH. These are the two largest digital assets by market cap. At the same time, both have made it possible for other crypto projects to continue to flourish. They form the backbone of most projects today.
An important indicator: the volume and number of transactions
The volume and number of transactions for an altcoin is another factor that indicates the demand for that project. In liberal economics, the relationship between supply and demand is at the core of understanding the value of a product. For many cryptocurrencies, the supply is fixed. The request then reveals the true value of that cryptocurrency. Based on the fundamental problem that cryptocurrency solves and how many people use it in real time, it is possible to baseline traded volumes. For those who don’t know, trading volume refers to the total trade of a cryptocurrency on centralized and decentralized exchanges.
High trading volume reflects real demand, while low volume reflects low demand. A new cryptocurrency will have a fairly low volume, but as its value increases, so will its trading volume. More in-depth analysis consists of the variation of trading volumes over time and ease of trading. The best indicator that trading volume may increase is where the asset in question is traded. The easier it is to invest in a cryptocurrency, the more likely it is to increase trading volume. At this point, listing on exchanges such as Binance, Coinbase and Uniswap is of great importance.
Does the altcoin have a roadmap that makes development possible?
A good altcoin project leaves room for improvement. Even though he’s on the market to solve a fundamental problem, the future is innovation for him. For comparison, Bitcoin introduced a peer-to-peer payment system. Then the Lightning Network was launched. This made payments on the BTC network fast, affordable and scalable. Scalability has been a downside of Bitcoin since its inception as it is slower than traditional payment systems. But now, thanks to the Lightning Network, this disadvantage is less felt.
The strong thing about BTC is that its code is open source. This means that anyone can use Bitcoin principles to build better things. So BTC is basically a building block and anyone can build on it. Ethereum, on the other hand, has several smart contract standards. These are the same ones used to launch decentralized applications. cryptocoin.com As we have reported, Solana (SOL) embraces these principles and supports the same. If a crypto project has various initiatives and future goals, it is good to consider investing.
The last factor: the market cap of the cryptocurrency
This last indicator is simple but important. Bitcoin, for example, has a market cap of $327.7 billion. Market value is the total value of a project against the dollar. For the altcoin, this refers to the amount in circulation relative to the current market price. Bitcoin is currently trading at a unit price of $17,050. This is what makes up the $327.7 billion market cap with 19.2 million BTC in circulation. This valuation is lower for other cryptocurrencies. However, technical and fundamental analysis is required to determine the ideal value of a cryptocurrency.
A high market cap should complement other indicators of a good cryptocurrency. FTX’s decline revealed that its high market cap is not an independent indicator. In other words, every function of the project you want to invest in should work well. The team, whitepaper, continuing education efforts, and community should all be in line on the project. Due diligence is vital in determining both the present and future value of a cryptocurrency. Ultimately, if you’re going to interact with him over the long term, it should be aligned with your needs and beliefs.
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