If you’ve been thinking about investing in cryptocurrencies, there are a few things you should know. While some are common sense, others are less so. Here, we discuss a couple of tips to help you out with the proper analysis of cryptocurrencies.
- What problem will your investing solve?
Before you invest your hard-earned cash, ask yourself what problem your investment will solve.
Take bitcoin as an example. It was the very first project that brought a real use case for blockchain technology. It was presented to the world as a cryptocurrency with extremely small fees, almost instantaneous transaction times, a degree of anonymity and a decentralised ledger.
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- Transparency
One incredibly important factor to take into consideration if you are wanting to invest in cryptocurrencies is the team behind the crypto. Here are a few important questions to think about:
- Does the team have previous experience in the industry that the project may be tackling? While previous experience isn’t a necessity, it certainly helps if the team has knowledge and expertise in the industry. Take the Enjin team as an example. They’ve been in the gaming industry for quite some time and do have the relevant understanding and skills to launch a cryptocurrency within the online gaming space.
- Does the team engage with the community and provide regular updates? Do they seem to be running to time in terms of delivering their roadmap? A good example of this is districtox – they communicate effectively and when necessary.
- If the team is anonymous and the project doesn’t require them to be, what are they hiding? For instance, it’s perfectly understandable if they are at work developing a privacy coin, but less so if they’re developing a cryptocurrency for, say, esports.
Fortunately, we live in a digital era where you can spend some time online looking for all the information you need in terms of who is behind a cryptocurrency project.
- Partnerships and Investors
One particularly positive thing when you are considering what to invest in, is to analyse the project partnerships and investor. While it’s a fairly self-explanatory reason, having the backing of reputable and renowned entities does give the project even greater legitimacy. Here are a few examples of projects with top-notch partnerships and investors:
- VeChain partners with DNV GL, PricewaterhouseCoopers and Kuehne+Nagel
- Request Network is backed by Y Combinator
- Stellar (XLM) partners with IBM
- IOTA received hefty investment from Robert Bosch Venture Capital GmbH
Final Word
These are just 3 ways to conduct proper analysis of cryptocurrencies you are thinking about investing in. It is important to know what you are going to be spending your money on. Just jumping on the latest and most popular coin may well bring short-term gains, but if you want serious long-term investments, you do need to carry out a proper analysis.
