If you are a first-time buyer of crypto currencies you will probably ask this question. I get this in my inbox at least once a day lately, so I decided to write this blog and give you my piece of mind on this subject.
There is a big difference between choosing a crypto from an investor point of view to choosing it as a trader.
With trading you will be looking at charts and base your selection on trends, performance and price catalyst factors so that will be a topic of a whole other post. This time I will focus on the more passive investment approach, something that most people seem to be aiming for.
Trading is not an easy skill to master and it is extremely time-consuming, so I entered that marketplace as an investor first and later tapped into the trading world.
So, how do you pick the right crypto currencies to buy and hold?
The obvious start is with Bitcoin – the big daddy of the crypto world. The most valuable, most usable of all, most sought-after and so on.. you get the idea. As far as safety goes, the long term potential for growth is definitely high here.
So, what next?
Look for VOLUME
Big volume means big capital is invested already, that also means popularity, usability, which basically tells us that the project is having a good potential for growth and longevity. Nothing is guaranteed and we are yet to find out how many of the current 1000+ crypto currencies are going to hang around for longer, but the ones that have a lot of volume are those with the highest chances at achieving that. The best place to find out how these compare by volume is to go to https://coinmarketcap.com where you will see their quick stats and you can arrange them in order by a few indicators, volume being the default one.
Look for USP [unique selling point]
Bitcoin is a crypto currency and so are most crypto coins. Some are application specific while some are purely crypto coins. Look out for those that are innovative. Those that offer something new, an improvement of sorts or something really different, are the ones with potential.
Look for popularity and media presence.
If a crypto is talked about, if it has media coverage, a strong, identifiable brand, this would mean it is already quite popular and that also drives the price up. If a crypto makes it to the mainstream [or at least semi-mainstream] that brings a lot of new buyers, thus with a growing demand you can expect a jump in value.
There are so many sources these days, facebook groups, twitter, slackchats, telegram groups, forums [reddit, bitcointalk and more]… and of course each crypto currency is a project of a kind and as such they have their own website. Make sure you check out their website, read their white paper, check their development team and current+upcoming projects, what is the future plan for this project, is there a long-term vision and where does it lead to… these are just some of the criteria you should consider in your research.
Gather public opinion.
Aside from the forums, where you will be getting a lot of public opinion from the users and fans or haters of the project, try to also find just general public opinion, through facebook and other social media that is not saturated with crypto fans, try to find what the average Joe knows and if they get excited about it, that would be another good indicator that the price will rise with time as the project/coin becomes more and more popular.
Did I mention RESEARCH?
Yeah, I know. I just wanted to emphasize the importance of doing your own research and learning about the coins you are buying. After all, you wouldn’t invest in stocks of a company without knowing enough about it, so same rule applies here. You must understand “why” and “if” your investment will bring you amazing return or not… You must also keep informed about any new development on the project that is supported by the coin, make sure that the development is not abandoned or any other internal or external factors that may change its course with time.
Where to start?
The most useful website for any crypto currency user is CoinMarketCap. This is where you can keep track on price, volume, ranking, popularity, performance and more. By default, the coins listed will be arranged by volume.
Another useful website that will facilitate your analysis is CryptoCompare which has a slightly more trading look and functionality.
To gather public opinion and feedback you can look into blogs, videos on youtube, twitter, telegram groups, facebook groups, steemIt network or slack chats which most crypto currencies have. Also check out these forums https://bitcointalk.org or reddit
Don’t forget to go to each project’s website. Many of the coins are only born out of a necessity to support the network and its developers so they will have a lot of information there to help you in your research.
For a start you should research each of the top 20 -30 coins. If you are going to be an investor, you might want to spread your capital and buy a few of these rather than go big on just one of them. Unless there is a strong reason for it, I would not advise to go big on any one coin because there might be a big potential in another coin that could surprise you. I bought Strat and Ripple very early on when I started and despite my passion for Dash or ETH, both Strat and Ripple gave me much more profit [at the time of writing this]. So even though I didn’t know much about Strat at first, the feedback I gathered about it pointed toward an uptrend [and that hasn’t stopped for the past 3 months now] and I’m looking at over 1000% profit from both XRP and STRAT. This is just an example. If I was a maximalist, I would have chosen Dash at the time, but today I am looking at 40% profit from it, which cannot compare to the performance of XRP and Strat.
This is why I would advise you to diversify and buy at least 10 of the top coins, the gain is always bigger than the losses [if any]. Doesn’t make sense? Let me elaborate.
Say you deposit 0.1 btc in Dash and 0.1btc in ETC [only hypothetical] and Dash plummets to -50% while ETC jumps by 100% [ which is very likely]. You will loose 0.05 but your gain would be 0.1 so you’re not loosing really. And what if you also had 0.1 in SC and that shoots up to 300% … you would have made 0.2 just from that so who cares about the 0.05 loss that Dash made… This is pretty much my strategy, except… I actually bought something like 30 coins in my first month and now my portfolio has grown to about 50. Only a quarter of them are long term for me, the rest are trading material.