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1. Common characteristics of potential coins
Every investor entering the cryptocurrency market seeks the coins with the highest profit potential, but evaluating which cryptocurrencies to invest in can be a challenging task. Experienced investors often rely on the following common characteristics to assess whether a cryptocurrency is worth their investment:
Stability:
The stability of a cryptocurrency is a critical factor when determining its long-term investment potential. The cryptocurrency market, by its nature, is considered a reliable choice for investors with long-term strategies due to its independence and decentralized nature, which help it mitigate excessive influences from various factors.
Take Bitcoin (BTC) as a prime example. Despite its price volatility, ranging from peak periods with prices exceeding $20,000 to trough periods below $4,000, its recoveries often occur quite rapidly. This reflects Bitcoin's core value as a highly stable cryptocurrency that can be included in a long-term investment portfolio.
In general, the stability of a cryptocurrency is not only about maintaining its value but also its ability to quickly recover from fluctuations. This instills confidence within the investment community, especially in the context of constructing and maintaining a long-term investment portfolio in the highly volatile cryptocurrency market.
Exceptional characteristic
Creating a highly stable coin like Bitcoin (BTC) is a formidable challenge, especially in today's context where most Altcoins are traded against BTC. However, it's not just Bitcoin that has the potential to achieve remarkable feats.
In the diverse world of cryptocurrencies, identifying coins with substantial underlying value and high growth potential is crucial. While Bitcoin holds a strong position, the diversity and creativity of other Altcoins cannot be overlooked.
It's important not to hold the view that only Bitcoin can achieve success. Researching and pursuing coins with significant potential from the outset can be key to earning substantial profits. Recognizing the fundamental value and potential of a coin, focusing attention, and investing early can yield significant benefits by attracting the attention of numerous other investors.
Synthesizing information and making informed decisions is also crucial to capitalize on investment opportunities in the competitive and volatile cryptocurrency market.
Liquidity:
Liquidity undoubtedly plays an undeniable role in making investment decisions in the cryptocurrency market. A coin with high liquidity not only provides convenience in buying and selling but also enhances its potential in the future.
High liquidity also provides investors with a safety advantage. An effective strategy is to invest only a small portion, about 1/10 of the average trading volume of that coin. This means that even when the market becomes volatile, investors can still have flexibility, easily cutting losses or safely taking profits without significant difficulty.
Therefore, considering liquidity is not just about executing short-term trades but also an effective capital preservation strategy in managing risks in a highly volatile market.
Growth Rate:
The issue of growth rate always plays a crucial role in evaluating any type of asset, and the cryptocurrency market is no exception. By examining the growth rate of a cryptocurrency, we can gain insights into its future development prospects and make forecasts regarding its market value over time.
The growth rate can be a deciding factor in whether to invest in a specific cryptocurrency for the short or long term. A high or very high growth rate can increase opportunities for investors to achieve quick profits in a short period. Conversely, stable and sustainable growth may appeal to investors with a long-term strategy.
Careful observation and assessment of the growth rate not only help understand the potential of a cryptocurrency but also support the decision-making process to align with the investor's goals and strategy.
Technology of Coin:
As a form of digital currency itself, evaluating the technology behind a cryptocurrency is always a critical criterion for measuring its long-term development. While major cryptocurrencies like Bitcoin (BTC), Ripple (XRP), and Ethereum (ETH) operate on common models and have interconnections, exploring a new coin with a similar model to these leading coins can present a noteworthy investment opportunity.
If you discover a new cryptocurrency that not only applies a model similar to today's leading coins but also features unique characteristics, it is certainly worth considering. Early investment in a new coin with high development potential and sophisticated technology can yield significant profits as it attracts attention from both the investor community and users. In the volatile cryptocurrency market, this approach can be key to seizing investment opportunities strategically and wisely.
2. 7 criteria to select potential coins
2.1. Development Team
The development team is a crucial factor and strategy for every cryptocurrency project. They are responsible for building and developing the coin, and everything from purpose, planning, to development strategy and their capabilities are vital. When evaluating a project, considering the project's founders is essential. They shape the goals, roadmap, and influence how the project evolves. If the founder has a background in IT/Coding, the project is likely strong in technology, whereas a founder with a business mindset may prioritize revenue and profitability. If the founder is a marketing expert, the project may have a robust advertising strategy, but the technology might not necessarily be equally robust.
2.2. Partners
The importance of the human factor also extends to partners. Partners not only play a supportive role in the project's development but also serve as a valuable community resource, representing those interested in and supportive of the project. In this way, partner relationships not only create opportunities for mutual development but also broaden community support and foster sharing among partners.
2.3. Investors
Investors play a crucial role not only in providing financial resources to projects but also in contributing to maintaining the value of related coins. Sustaining this stability is not just an issue for the project itself but a common concern within the community. If the price of a coin is manipulated or experiences sudden declines, it can negatively impact community trust and the project's development potential. Through their support and efforts to maintain value stability, investors help safeguard the interests of the entire investment community, while also shaping a positive environment for sustainable project development.
2.4. The Purpose and Feasibility of the Project
Projects may have multiple purposes and commitments outlined in their whitepapers, but true success only comes when those goals are "realized." Some projects present ambitious promises in their whitepapers, but to ensure feasibility, investors need to conduct thorough research. Check whether the project's solutions have been implemented and assess their success. If the project introduces a new direction, ensure its feasibility and evaluate its creativity. However, the most crucial aspect remains the project team's ability to achieve these goals. The project needs to address market issues and be feasible, while also evoking emotions and meeting the practical needs of users.
2.5. Tokenomic
Tokenomics, or cryptocurrency economics, involves the process of allocating funds before, during, and after the issuance of a coin. Some key terms in Tokenomics that investors should pay attention to include Token Supply, Market Cap, Token Governance, Token Allocation, Token Release, and Token Use Case.
One of the most important aspects is to examine the allocation of funds among different entities. Project teams and advisors typically hold a certain percentage, and if the total percentage held by the project is below 25%, it indicates a reasonable allocation.
The difference between the sale price and the token called capital is also crucial. If the sale price is low during Seed or Private token rounds but increases significantly during community fundraising, it may indicate significant influence from VC funds. The difference between the sale price and the token called capital should ideally be around 3-5 times to avoid a situation of "dumping". Careful examination of unlock schedules and vesting periods is necessary to ensure logical progression and prevent sudden dumping of tokens.
2.6. Marketing capabilities of the project
In the process of evaluating a cryptocurrency project, it is crucial to check social media channels such as Twitter, Discord, Telegram, and Facebook. Investors should review the content of posts, images, and community interaction. While the number of followers is important, particular attention should be paid to the level of engagement, such as likes, shares, and comments. This interaction often reflects genuine community interest.
The project's marketing strategy is also noteworthy. Serious projects often invest in activities like minigames, airdrops, or other programs to create impact and attract the community. Investors should assess whether this strategy is sensible and positively impacts the community.
Another significant point is whether the project participates in Launchpads on major exchanges like Binance. Major exchanges typically impose stringent requirements, and being accepted on a Launchpad can be a positive indicator of the project's credibility.
Investors should be cautious of projects focused solely on collaborating with Key Opinion Leaders (KOLs) for advertising. If the marketing strategy relies solely on KOL endorsements without other community engagement campaigns, it could be a sign of a non-serious project or a potential "scam."
2.7. The potential of the coin when listed on the exchange
Once a coin is listed on an exchange, investors should pay attention to factors such as the listing price compared to the ICO price, Marketcap, and liquidity. Investors often seek coins with potential price appreciation upon listing.
If the listing price is lower than the ICO price, it could be a sign of issues within the project, and thorough due diligence is necessary before investing.
On the other hand, if the listing price is higher than the ICO price, the coin may attract investor interest and exhibit strong buying pressure. However, caution is advised to avoid buying at the peak to mitigate FOMO risks.
Additionally, it's crucial to note whether the coin is listed on reputable exchanges like Binance, Coinbase, or FTX. Smaller exchanges may manipulate prices and contribute to pump and dump schemes.
3.T he most potential cryptocurrencies for long-term investment
3.1. Bitcoin (BTC)
Bitcoin with the largest market capitalization and accounting for 41% of over 20,000 cryptocurrencies, remains the first and holds its position as "digital gold." With a market capitalization reaching up to $1.025 trillion USD (as of February 2024), Bitcoin demonstrates high liquidity, significant trading volume, and enduring appeal in the cryptocurrency market. With a limited supply of 21 million coins and advanced technology, Bitcoin has established itself as a crucial part of investment portfolios, ushering in a new era for cryptocurrencies.
3.2. Ethereum (ETH)
From a technological and intrinsic value perspective, Ethereum can be considered a strong competitor to Bitcoin, especially with valuable applications such as Smart Contracts and DApps (decentralized applications). Ethereum has also made improvements in transaction speed and fees. However, due to its emergence after Bitcoin, Ethereum has not yet garnered widespread support from the community.
Unlike Bitcoin, the supply of Ether is generated by the Ethereum network and does not have a specific limit. This means the amount of Ether available can change depending on decisions made by developers and market demand in different stages, unlike the strict rules followed by Bitcoin and some other coins with a limited supply. This could be seen as a "weakness" of Ethereum compared to other coins with a fixed supply.
3.3. Binance Coin (BNB)
Binance Coin (BNB) is the official cryptocurrency of the Binance exchange, one of the largest and most reputable cryptocurrency exchanges globally. Using BNB to pay transaction fees on Binance provides users with discounts and cost reductions, thereby increasing the utility and value of the coin.
Another crucial factor is that BNB is integrated into the Binance Smart Chain (BSC), a blockchain platform developed by Binance. BSC provides an environment for building and deploying decentralized applications (dApps) and smart contracts, similar to Ethereum. This capability positions BNB to participate in various decentralized finance (DeFi) projects and applications, expanding its utility and value proposition.
4. Smart investment strategy
Strategy 1: Start with low capital
When entering any investment activity, it's crucial not to commit too much capital at once. Instead, start with a small investment to ensure that potential losses do not significantly impact your psychological and financial well-being. This approach allows you to accumulate experience in the investment process and provides flexibility in case of risks.
Strategy 2: Diversify Investment Portfolio
Avoid putting excessive trust into any single factor, which is a common investment principle. To minimize risks, diversifying your investment portfolio is an effective solution. In today's market environment, cryptocurrencies differ not only in liquidity and intrinsic value but also in community trust. For example, BTC is often favored but comes with high price volatility. To maintain asset balance, diversifying the portfolio is crucial. Investors often consider criteria such as high market value, significant intrinsic value, and low price volatility when selecting cryptocurrencies for investment. This helps minimize negative market impact and creates a more stable investment environment.
Strategy 3: Choose Suitable Investment Approach
In the volatile crypto market, choosing the right investment strategy is a critical decision. Common strategies include "Hold" (long-term holding) and Swing Trading (short-term trading). Hold is suitable for long-term investments, particularly for high-potential coins like BTC or ETH, while swing trading focuses on short-term price fluctuations to profit from price differentials. Most importantly, clearly define goals and risk tolerance. Monitor the market, stay updated with information, and evaluate strategies to ensure successful and effective crypto investment.
Strategy 4: Invest in Core Coins
Investing in core coins, also known as "blue-chip coins," brings many benefits when you invest time to research and understand them thoroughly. Careful selection, such as choosing stable and reputable coins like Bitcoin or Ethereum, can help balance risks in your investment portfolio. Focusing on projects with long-term strategies and daily market monitoring are crucial steps to ensure effectiveness in navigating this volatile crypto market. Furthermore, diversification within coin groups, coupled with patience, is key to building a stable and sustainable investment portfolio.
5. Conclusion
In summary, choosing cryptocurrencies for beginners in the crypto market requires careful consideration and knowledge. By applying criteria such as liquidity, project credibility, long-term goals, and risk assessment, newcomers can build a stable and sustainable investment portfolio. Moreover, staying informed about market trends and developments is crucial for adjusting investment strategies over time. With sound knowledge and strategies, new investors can embark on their investment journey confidently and wisely in this promising world of crypto.
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