Dear long-term investor, how to find the best crypto coins and cryptocurrencies? A popular question among especially young crypto investors today. After all, past experience has shown that finding the best cryptocurrencies can lead to ridiculously high returns. Even the smallest amounts can make us rich. Although we assign this a low probability, it is actually possible. No wonder it is a popular method for young investing.
So how do we find the best crypto coins and cryptocurrencies?
How do I find the best crypto coins and best cryptocurrencies?
We find the best crypto coins based on extensive analysis. We can apply both technical and fundamental analysis. Keep in mind that this works differently from investing in stocks. Analyzing stocks is proven because stocks are issued by (profitable) companies with an intrinsic value.
We cannot find the best crypto coins based on intrinsic value, because it is usually limited or even absent. This makes investing in crypto a (very) risky activity. Nevertheless, there are some factual criteria that we can use during our analysis. Using the 10 criteria below, we can find the best crypto coins.
Analysis 1. Strong Track Record
Finding the best crypto coins is no easy task. Determining the potential of a cryptocurrency is not a piece of cake, as well. However, one thing that remains helpful when dealing with cryptos is “Data.”
When you check the past trend, you can judge how it will perform in a specific window of time. We are not saying crypto pricing merely depends on its strong track record, yet it is one of the strongest factors determining the potential. Since the crypto market is highly volatile, one can find a favorable time to invest while minutely observing the graphs. So, one can grade a cryptocurrency relatively higher than the one with a weak track record.
Note that this very fact is a weakness of the crypto market. The fact that technical analysis can lead to finding the best crypto coins is not a comforting thought. After all, we would rather invest in the best crypto coins based on fundamental analysis. But as indicated, this is partly what we lack. Therefore, use also the other criteria from this list to obtain a more complete analysis!
To help you, we have done some research on crypto coins with potential. Purely for inspiration. Check out this 10x new crypto with potential.
Analysis 2. Liquidity
The higher the liquidity of your coin, the greater the chance for you to sell it. Before placing your position on any cryptocurrency, you must observe its liquidity strength. Don't underestimate this. Liquidity is a requirement when the crypto market crashes and you want to act quickly.
Trading volumes are one of the most important elements determining liquidity in the cryptocurrency market. Daily volumes may be seen on any market cap rankings website. The larger volume suggests more individuals buying and selling coins.
Another thing that affects liquidity is usability.
The more people utilize cryptocurrencies as a form of payment, the more liquid they become. Regulations are one of the most important factors that affect liquidity. If a coin is regulated in a country, it will be easy to buy and sell, and hence it will be more liquid.
Hence, when finding the best crypto coins, it is worth checking liquidity before making an investment decision.
Analysis 3. Market Capitalization
The market capitalization is the aggregate worth of all the coins that have been minted in that cryptocurrency. It is also referred to as “Market Cap.”
The total amount of money in circulation is the product of the numbers of coins in circulation and the current market price of a single coin. The coin with a high market capitalization is likely to be more reliable than the coin that has less. The coin with the high market cap depicts more investors in the game and witness huge trading volumes there.
In other words, the higher the market value, the more popular it is. Often the biggest cryptocurrencies, such as Bitcoin and Ethereum, are popular for a reason. Sometimes because they are the "best," or because they offer a lot of potential.
It is important to consider that the market cap doesn’t bound to a few market makers. If they liquidate, there will be a huge shortfall in the prices instantly. A high number of investors makes the market more stable and less volatile. Often, the larger the cryptocurrency, the more liquid it is.
Analysis 4. Technology
All famous cryptocurrencies are based on Blockchain technology. Despite having the same core, there remain complex differences in technologies. It is important to search for the technology that specific crypto is following. Identically, check out the potential of that technology in the future. That’s how you can determine the potential of a certain cryptocurrency as well.
Analysis 5. Volatility
Before diving into cryptocurrency trading, every layperson knows how volatile the crypto market is. Some find it an opportunity, while others hesitate to invest in highly volatile coins. Either risk-takers or risk-averse, the market has every kind of trader. You will find more potential in highly volatile coins if you are a risk-taker and vice versa.
For example, crypto day traders only look at highly volatile crypto coins. From their perspective, they consider this one of the most important criteria in finding the best crypto coins. Therefore, "the best" is a subjective term.
So keeping the targeted profit under consideration, one can decide to invest by pre-search the volatility of that asset. Even stable coins don’t guarantee to be stable in the future, but after a thorough market study, you can find the most stable coin to invest in.
We can use volatility to our advantage. This is one of the advantages of crypto trading. The strong price fluctuations make it ideal for (day) traders. Read more about crypto day trading tips for beginners.
Analysis 6. Market Supply and Burning of crypto coins
Coin supply refers to the expected number of coins available in the future. You may check the supply of a certain coin to ensure that you are not impacted by unit price bias, which occurs when there is a huge supply of a particular coin since its price is low. Similarly, it has been seen that some coins have to “burn down.” It is the act of removing coins from circulation to diminish the total amount of coins in circulation.
When finding the best crypto coins, it is important to choose limited market offerings. Also, only look at crypto coins with a fixed number of coins. And determine whether the developers are likely to choose to "burst" or not. The latter ensures a lower supply. If supply drops and demand stays the same, the price may still rise.
Analysis 7. Giants in the Role (and crypto wales)
It is necessary to keep an eye on what the giants are doing on cryptos. The tweets and the news determine their standings on cryptos. If a big e-commerce company announced to make a certain coin as their mode of payments, it shook its prices. In the same manner, the potential of a coin can be anticipated if market giants decide to use it as a medium of payment.
Analysis 8. Diversity
Every crypto veteran suggests diversifying the risk while investing in different coins. If you seek a career in crypto trading and want to trade safe, it is a must to diversify your portfolio. You have to search for coins that possess diversification attributes. If the coin is extremely volatile, it may be risky to go for. If it has a steady pattern that suits the investing strategy, you can go for it. In the end, not a single factor can determine the price direction. Although gaining a lot of knowledge and experience does help us find the best crypto coins.
Even experienced crypto traders are often wrong. Finding the best cryptocurrencies is difficult. Also in this context, it is important to have a lot of diversification. Therefore, always put together a crypto portfolio!
Analysis 9. Launching Pads
Crypto Launchpads are also known as IDO platforms. These are the platforms for launching new coins and projects. To be launched on a platform, it requires to meet certain criteria. Best launch pads have strict criteria. In one way, we can say that the coins launched on credible platforms are more valued than those on less credible platforms. So, it is one of the factors to determine the potential of a cryptocurrency.
Analysis 10. Who’s Backing the Project
Strong organizations keep the standard maintained no matter what project they are working in. This holds right for blockchain as well. Due to the evolution of financial technology globally, big fishes are on their way to launching their cryptocurrencies. If you stay in touch with the crypto news, you will find handsome projects in a company’s pipeline.
The potential of a cryptocurrency somehow appears to be correlated with the backing authority. Even though the crypto market is highly volatile, there remains a chance of sustainability when a well-known company owns it.
For example, suppose an online Social Media platform with (hundreds of) millions of users decides to launch its coin. When they launch it, there is a high probability that the existing user will involve in it. So, that platform has the edge to enjoy stability and sustainability even initially.
Conclusion on finding the best cryptocurrencies
In this article, we have provided 10 criteria to help us find the best crypto coins and cryptocurrencies. As indicated, we experience a lot of uncertainty compared to analyzing stocks. With stocks, it is much easier to speak with hard data and facts. Think about earnings figures based on the past and present. We can also more easily estimate how big its market potential is.
In finding the best cryptocurrencies, such data is lacking. As a result, crypto is and will remain a speculative move for the time being. We would definitely not want to speculate more than a maximum of 3% of our assets.
Nevertheless, these 10 criteria can increase our chances of success. The question is: Is it enough?
In our opinion, no. We prefer investing in real estate and equities, if necessary through ETFs or REITs, to cryptocurrencies at all times. This is for the simple reason that we can invest with more facts and certainty.
What analysis and criteria do you apply when finding the best crypto coins?