Cryptocurrencies have shown beyond doubt that they can be excellent investment options. Since the bitcoin boom in 2017, cryptocurrencies have become better than stocks and gold. But there is a problem, with over 1,500 digital goods listed on the market, how do you order the best? How do you say the good from the bad? This is crucial because although some cryptocurrencies have performed well, some have started up and ended up on the floor.
Sorting over 1,000 coins is not an easy task. An investor can not cross them all, following their projects, the development team and the like
Fortunately, there are four indicators that always help to determine where a cryptocurrency is heading. These indicators are; Total supply, circulating offer, coin price and market capitalization. These four indicators will help you better understand a cryptocurrency and will improve you as a trader.
Total Supply of a Coin
So, why is it important to know the total offer of a coin? The supply of a currency, which is simply the number of coins circulating, the coins that will be released (through mining or held by the founders) and coins held by investors. The rule has always been, the higher the offer, the lower the price. If the coin developers have released, or at least intend to release a large amount, prices will fall due to low demand. However, although this is the norm, some external factors sometimes influence the price regardless of the supply of money.
Some factors that usually affect the total offer of a currency include; coins held by the founders, mining rate (faster mining means more cryptocurrency on the market) and corporate lock-up (cryptocurrency held by the company rather than individuals).
This is the number of coins that are traded at this time. This information is usually found on the cryptographic market of Coinmarket.com and is easy to find. Why is it relevant? This will help you determine the demand for a particular currency because the circulating offer is the value used to calculate the price of a currency. The rule here is; the lower the circulating supply, the higher the price. A great example here is Ripple, the offer for this coin is billions and, in turn, the price of the coin is cents. Zcash, on the other hand, has only one million stock, but it costs hundreds of dollars.
The only way in which the circulating offer changes is if new coins are drawn or if the founders release coins or release coins are released from the company. Coins like the Binance coin are usually burned every quarter by the founders, which also affects the price, as the offer continues to fall.
This is the value that the currency currently holds on the market. This is also a great indicator and it is above all because the price is determined by the circulation of supply and demand. This means that if the circulating offer decreases, prices will increase. If the reserve increases, for example, if the founders release coins (fortunately these coins are locked on a smart contract and are scheduled to be released), the price drops.
Market demand is difficult to understand because it is often a result of external factors. This can include; regulations, new projects and partnerships. The question is due to the fact that people want to pay more for a currency, but the supply is low. This usually leads to higher prices because everyone wants money but the offer is not there. The rule here is; the higher the demand, the higher the price.
To understand the price, you must also understand factors such as price corrections and the psychology of the price of coins. For example, with price corrections, after an ICO, if investors who bought a large amount of tokens are able to flood the market with coins once prices rise.
Market Cap; The Best For Last
This is the simplest and most important factor in understanding a currency and predicting its price change. Market Cap is simply the value of all the altcoins in the market right now. Although the data has already been documented, it can easily be calculated by multiplying the current offer for the price. The answer here direct talks to your ROI (Return On Investment). The rule is; the greater the market capitalization, the lower the probability that prices will rise and the lower the market capitalization, the greater the probability that prices will increase.
Market capitalization can also help evaluate the ICOs to invest in. For this reason, it is always advisable to invest in an ICO with a low market capitalization compared to a high market capitalization. However, a certain bass is not good at all. Sometimes the market capitalization is so low that indicates that no investor wants to do anything about it regardless of price.
A little more research would not hurt
All of these indicators will always direct you to the right directions but before making a final decision, it always helps you to learn a little bit more about the coin . You can look at the history of the coin, the project behind it and the team that drives the currency.