How to Choose Best Cryptocurrency for Trading
We are dedicated to making your crypto journey an easy one. We will be sharing some of the factors we take into consideration before we invest in a crypto project, especially when we plan to 'HODL".
I'd say women generally make the best traders. And maybe my dad, nothing goes past him. My reasons? Well, women typically pay more attention to details, and if they are not emotional, they tend to make the right decisions. Yes, I said it! I am riding bitcoin to the moon, so you can find me up there if you have a problem with that.
When it comes to selecting the perfect crypto to buy and "HODL", you need to look out for signs and indications that the coin you are about to invest your money into will be worth something in the long run.
As a trader or investor, you need to have a checklist which will, in turn, help you to make the right choice.
There have been cases whereby a crypto project team just stops communicating with members of the community. And eventually, the coin dumps to zero, and everyone loses money. This has happened several. Some project teams even go as far as withdrawing all the funds raised during ICO and go dark. This is commonly referred to as an "exit scam".
Also, it is not uncommon for a project to be all talk, no action. They make huge promises only for them not to fulfill these promises in the end. Or keep shifting the date they initially set for launch. These reasons and many others are why you should always make sure a project pass your examination before you invest a dollar into it.
As you know, we are dedicated to making your crypto journey an easy one. As such, we will be sharing some of the factors we take into consideration before we invest in a crypto project, especially when we plan to 'HODL".
The blockchain industry is built around it being decentralized. As such, any project not offering that or offering a watered-down version of this should be avoided. When a project is not genuinely decentralized but is planning to capitalize on buzzwords such as Blockchain, cryptocurrency, DLT, etc., then you know something is not right. History has proven that projects like these are usually run by those who don't know a thing about blockchain technology.
For those who don't understand what I mean by true decentralization, here is a brief definition. It simply means a system design in such a way that you don't have to put your trust in anyone for the system to function well. Saying no one is the boss. The team in charge of the project are employees of those with investment in the coin.
In a trust-less decentralization system, a transaction can be conducted without the need for services like escrow or any middle man. Once a deal is being made, it becomes visible to everyone. As such, it becomes traceable. Also, you get to see your transaction has it moves in real-time.
Any project that can't offer a trust-less network should not be considered a crypto or blockchain project. Therefore run your check before you invest.
Advanced Solution is a Must
Most projects are a replica of already functioning ones. We don't need another super fast cross-border money transfer coin. Or another Dapp development network. We already have 100s of those. The majority of these new projects are exact copies of established coins, just that they are unique and sassy. Don't fall for it. If a project is not offering something different from what we already have on the market, stay away from it. I wait for bitcoin to pump along with other top altcoins, and then look for coins like this and sell as much as I can. They usually almost always correct after the pump subsides. (This is not a trading strategy, it's just something silly I do: Don't go wasting your money).
Before a project qualifies for investment, it has to be unique and useful. Its usefulness also needs to cut across a broad range of users. You can't expect a coin focused on say pet fish lovers to yield something tangle in the long run. How many pet fish get sold daily? How many people have them as a pet? These are some of the critical questions you need to ask before investing in a project.
Long Term Scalability
Another critical factor to consider is scalability. Just because a project promise to make a thousand transactions per second now doesn't mean the same number will be adequate in the next five years. As such, a project needs to address the issues of expansion and scalability from the onset. The point of scalability has been affecting the blockchain space for quite a while now. This issue has led to several network hard forks. Bitcoin, for example, is not designed for fast or millions of transactions per second. But now, the network demands this. This particular reason has led to the development of several coins in the market right now. Bitcoin's lack of adequate scalability has been used as a marketing ploy by many currencies, and I don't think this is ending anytime soon.
So if a project doesn't prepare for future expansion, it only means the team behind it lacks vision, or they are just in to get some money and exist.
Just because a project's whitepaper states that the network is capable of conducting "1,000,000 transactions per second", doesn't mean it is true. Reports have shown that these claims are not realistic. The network will have to have a controlled network latency. By being controlled, the system is no longer operates in a trust-less manner.
What this simply means is that when running a server nearby, it is possible to achieve speeds like this. But with the way blockchain network servers are scattered globally, other factors come into play.
As such, you need to watch out for such unrealistic claims and stick to the facts. If the realistic promises are necessary, then don't buy such coins.
As regards scalability, several methods are now underdeveloped. Such practices include "DAG" and Sharding.
We won't be going into this for now, but you should do your findings of these to know what to look for in a whitepaper before you bite.
A Working Network or Live Mainnet
ICOs are designed to raise money for a project to build its platform. Some projects already have a working network even before doing an ICO. As a wise investor, it is always better to invest in a project that already has a working prototype. A working prototype means the team behind the project are on track and not just pumped about a "great idea". Because once the money comes in, the hunger is likely to subside. So it is not uncommon to find projects pushing forward a mainnet launch for as long as they can. This is why it is better to invest in a project right after their mainnet goes live for real. Or wait to check out the market mood regarding the mainnet launch. If the social media street is full of thumbs up, then it is time to buy. If otherwise, I guess it is time to sell.
These are some of the critical factors that I consider before investing in any coin. Feel free to add more in the comment section.