Cryptocurrency investing: Reddit user shares 10-factor approach to getting the most out of it
From Elon Musk to Snoop Dog to Gene Simmons, cryptocurrency has taken the world by storm. But there is always a huge risk that comes with digital currencies and needs to be considered before and during investing. A recent example is Bitcoin, the oldest and largest crypto coin in the world which plunged nearly 30% after the Chinese government’s crackdown on trading in digital assets. Having said that, there are still a large number of investors who find the idea of investing in cryptocurrencies enticing but are unable to take the plunge due to lack of knowledge.
And for them maybe that Publish by a Reddit user (u / teoeo) can be helpful. The user, before listing 10 crucial factors, claimed that he has been involved in digital currency investments since 2017 and, therefore, would like to share his two cents on how to go about it. The user insisted on choosing the coins using a value investing approach. Here are the 10 factors listed in the article:
1) User emphasized that it is important to only consider digital currencies that looked like traditional businesses. Also, said would only look at cryptos that have a “discreet product or service that they provide.” He then said that if they were open to considering cryptos like Siacoin / Storj / Filecoin (decentralized storage), Golem / IExec (cloud computing), Theta (video streaming), Power Ledger / WePower / SunContract (decentralized energy market), do not invest in Bitcoin, Nano or other similar currencies.
2) Once you’ve selected a few potential cryptocurrencies to invest in, it’s time to rule out those that didn’t have a value-added proposition due to decentralization. “Believe it or not, everything doesn’t have to be decentralized. If I can’t explain why decentralization adds value, then I’m throwing the coin,” the user wrote.
3) The third step is to determine if the digital currency has a working product or a beta product. The user said this step is essential because anyone can say their product will do anything, but the proof is in the pudding. “If they have a product that works, I test the product to see how it works.”
4) The next big factor to consider before investing in digital currency is to make sure that your potential cryptocurrency has a method of maintaining funding from the developers of the product / service even though the price of the coin drops. To clarify, the user said that strong projects usually have nonprofit foundations with an ongoing source of income for the developers. “This ensures that the project will continue to mature / grow even during a bear market.”
5) Then the user said that it is important to research as a priority the number of coins already in circulation, the percentage of a coin controlled by a small number of people. “There are other red flags that may appear, so I suggest everyone spend some time reading tokenomics in general.”
6) Evaluating the size of the market is what was suggested next. “I’m always trying to look at the current size of the market in the space the coin competes in. For example, for Storj / Filecoin / Siacoin, the decentralized storage market is expected to be around 150 billion by 2022. . “
7) The next step is to find the traditional space companies and their market caps. The user said it helps in making the decision.
8) Going forward, the user suggested that it is still a good idea to look at who the competitors are in the cryptocurrency space. This can help you find a better investment, and secondly, of course, it’s the competitors who will have a useful critical opinion on the part you have chosen.
9) User suggested going to target room and competitor’s Telegram / Reddit / Discord servers. “It’s amazing how many times I learn something unexpected and useful.”
10) It’s time to put it all together. Once you gathered all the information, the user suggested that you make a reasonable / conservative judgment on the coin’s current value and its potential value in terms of market capitalization. “I try to be conservative and only buy things that seem really undervalued. Fortunately, a lot of cryptos are very undervalued.”
But before investing in the volatile cryptocurrency market based on the information shared by this user in their Reddit post, and, perhaps, giving popular virtual currencies like Bitcoin and Dogecoin a pass, the user has one more tip for you. .
“I hope some of you will find this helpful. Obviously, these are just my thoughts, so take them with a grain of salt.”