1. Follow your intuition
As simple as it may sound, the first impression is usually the right one. Most investors are sensitive to marketing and communication returned by the project. Thus, if the name, the logo and the project reflect a professional image, the cryptocurrency will have better chances to start its course on a good basis.
The website, showcase of the project, is therefore very important to analyze. Indeed, how could one imagine a team capable of implementing a complex project based on the Blockchain technology if this same team is not capable of creating a simple website?
However, although a good first impression is essential in the choice of a crypto-currency, it is by no means enough!
2. Understand the technology
The technology on which the cryptocurrency is based is an essential point to evaluate. Indeed, as with any asset, it would be crazy to invest in the said cryptocurrency without knowing its fundamentals.
Do not hesitate to inquire on the internet if the cryptocurrency in question uses proof-of-stake, proof-of-work, both or neither (we will not go into detail in this article on these specific technologies used).
3. Is the emission of tokens limited?
The amount of tokens created is an important variable to consider. Indeed, if the quantity of tokens is limited, it is possible to envisage a probable rise in the price because of the future scarcity of the number of tokens.
For example, Bitcoin allows an emission limited to 21 million tokens. On the contrary, in the case of Ripple which has an unlimited number of tokens, its potential therefore does not lie on its scarcity but in the projects in which will be used in the future.
4. Is the project team qualified?
We must also be careful of the team behind the cryptocurrency. If the project looks good, it is always possible that the team behind it is not up to the task and unintentionally fails the project.
The motivation and the real reasons for launching the project should also be carefully considered: who pays the developers, do they have conflicts of interest, are their salaries transparent or have they created a cryptocurrency for the only purpose of making a profit?
You need to evaluate the team’s background as well as the relationships they it has with the community (is it cordial and constructive?). The Reddit community’s opinions regarding cryptocurrency are a good indication of the viability of the project and the feeling shared by an informed public.
5. Look at the price trend
Finally, if you really like a project, you will nevertheless need to use technical analysis of graphs to know the current market trend. Indeed, it is strongly used in the short and the mid-term by the crypto-investors to predict the fluctuations of the cryptocurrencies’ values.
However, if a project has fully conquered you, and you are ready to immobilize some of your money (money that — it must be noted — you are ready to lose entirely, the crypto universe being still very uncertain), you can always avoid this technical analysis. Of course, this will be a risky “double or nothing” bet, based on your unique feeling concerning a cryptocurrency that is close to your heart.
As was the case for some idealists who invested a few thousand dollars on Bitcoin in the years 2010…
Also note that…
When investing in a cryptocurrency, it is necessary to analyse the various partnerships it could develop with other companies and the direct competitors on the market in order to establish a precise idea of the project’s potential.