7 Things to Consider When Choosing Cryptos to Invest In

If you’ve ever tried to invest in cryptocurrencies, you’ll know that there are almost too many to choose from. At any given time, the market has thousands of options and while this might mean that you’re spoiled for choice, it could also be confusing.

Michael Shaw explains that finding an investible cryptocurrency can be complicated, even for those already experienced with the industry. When choosing a crypto asset to add to your portfolio, there are a few things you should consider, some of which are as follows:

Past Market Performance

One of the ways to predict whether a crypto is going to do well is by looking at its previous market performance. Tokens that have been in the industry for a long time and have continued to give healthy returns are generally a good choice to invest in. This is particularly true for investors who are more risk-averse.

Beyond token viability, looking at a crypto’s past market performance will also give you an idea of how volatile it tends to be. A token could prove to be very volatile with extreme market highs and lows and knowing this will let you know what to expect if you buy into it.

Upcoming Ecosystem Changes

Major milestones, upgrades, forks, and other changes to a token’s native blockchain tend to have an impact on its price and so, this should be considered before you make an investment. The switch from a proof-of-work to a proof-of-stake consensus by the Ethereum Foundation had a positive impact on the price of its native Ether token and benefits investors,

This tends to be the case with major developments from tokens like Ether. And we can’t forget about the Bitcoin halving which has always coincided with major market movements. So, when investing in crypto, consider if its ecosystem will be experiencing any major changes in the future and how these might benefit you.

Use Cases

A cryptocurrency will perform well in the market if there is a demand for it and a crypto will be high in demand because it has strong use cases behind it. XRP, for example, is high in demand because it is used for cross-border transactions and Ether is high in demand for settling transactions in DeFi, NFTs, GameFi, online casinos and so on.

Before you choose a crypto, ask yourself who has a practical need for the token and how long this need will last. This will let you know whether you can expect a profit in the short term or long term.

The Team Behind It

Just like any other industry that has to do with money, there are people with a lot of experience in launching successful projects that benefit their investors. Take Cardano, which was co-founded by one of the original creators of Ether. Now, both companies are in the top 10 cryptos by market cap.

In a similar vein, always consider the team behind the token. While first-time creators can make valuable tokens, you should ideally seek out cryptos that have an experienced and qualified team behind them. If you cannot find any information about the token’s creators, you might want to be cautious.

Industry Buzz

While it is by no means foolproof, keeping your ear to the ground and knowing what the crypto industry is saying about a particular token can help guide your investment choices. This is because the industry is full of both professional analysts and people who simply have a knack for spotting tokens on the rise.

Months before it was approved, there had been industry buzz about the spot Bitcoin ETF and what it would mean for its price. The same is true about lesser-known tokens that are hyped for a price spike long before they even happen. While you should still be discerning, knowing what tokens are getting a lot of buzz will only help you.

Trends

Many cryptos take off because of existing or upcoming trends in the industry and this can be a way to choose the ones to invest in. Meme tokens are especially useful in this regard as they are often made about current events and pop culture trends.

If you can foresee a trend, you could invest in a crypto-based system and make a lot of money, like the tokens that went viral after the Queen of England died in 2022. At the same time, developments can lead to the death of these tokens, as we’ve seen in the case of the Sam Bankman-Fried tokens.

Whitepaper

Before you invest in a crypto, it would be a good idea to take a look at its whitepaper. A whitepaper is a document that explains everything about the token, from its use cases to its tokenomics to its blockchain features.

Looking through the whitepaper will give you an idea of whether or not it is a quality token, whether it has use cases, the team behind it, how its pricing mechanism can favour you, where to buy it, and so on. This is especially true for newer or lesser-known tokens and can help you learn a lot of information about them in one go.

Conclusion

Choosing a crypto to spend your money on can seem like a daunting process at first. But if you keep the above things in mind, your decision-making could be a lot easier. While no rule is set in stone, it will let you weed out the wheat from the chaff and be several steps closer to knowing which cryptos are worth taking a risk on.