Cryptocurrency Investment: Reddit User Suggests Things to Keep in Mind Before Delving Into Digital Coins

There is no sure way to predict a cryptocurrency’s future, but a Reddit user has listed out factors one must take into account before investing.

By Edited by Gadgets 360 Newsdesk | Updated: 14 July 2021 12:54 IST

Cryptocurrency Investment: Reddit User Suggests Things to Keep in Mind Before Delving Into Digital Coins

Bitcoin is the world's largest cryptocurrency and has seen extreme volatilities in the past

Highlights

Cryptocurrency is is still driven largely by hype, the reddit user said
Deciding what to hold is a major challenge for cryptocurrency investors
Bitcoin price in India stood at Rs. 23.8 lakhs at the time of writing

Cryptocurrency investments have seen a rise all around the world today. Almost everyone is curious about it, but not many understand the intricacies of how it functions and even fewer have been able to crack the code. While it may look exciting from a distance, digital currencies are said to be increasingly volatile. Investors must not only prepare for the uncertainty it brings but also the losses that they might have to sustain if their anticipation of events or boom falls flat. So, it was not all fun and games when the price of Bitcoin, the world's largest and oldest digital currency, surged and slumped within a matter of weeks.

A question, therefore, comes to everyone's mind — “How do we get to know which token is the best to invest in?” Again, there is no sure-shot way to predict a cryptocurrency token's future but a Reddit user, u/kemcpeak42, has listed out factors that one must take into account before taking a call on which token to invest in.

After discussing on Reddit, the user decided to post a list and said that if you are new enough to cryptocurrency or to investing in general, do yourself the massive favour of diving deeper into investing and engage in the process of finding value in an asset.

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“Crypto is obviously a largely speculative market, and is still driven largely by hype," said the user, adding that some didn't even know how to identify if a coin was good or bad from an investor's point of view. The user asked people to do their own research, and not just rely on what others have done.

The user added that eventually, fundamentals will determine the leaders in this market. "When the speculation and hype fade away and the volatility diminishes, and this becomes a mature market—how do you decide what to hold?"

Here's what the user suggests when it comes to doing your research on a cryptocurrency token:

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The first step is to read the white papers, followed by patents and the website. The language used, the presentation and the information available there helps a great deal in understanding more about the token. The next factor, the user said, is to look at the roadmap of a token and see who the partners are.

“Follow the venture money back to the source”, the user wrote next, adding, “look at the circulating/max supply”. The position of those already holding a token can give you a clear picture of where the currency stands in the market and helps evaluate the risks as well.

The next step is to look at social and technical aspects of a token and then of course the market presence and quality, said the user.

The last two steps include keeping an eye on the adoption and the leadership. Last, the user said that none of the factors highlighted in the post relied on a stranger's opinion. "They are all readily and objectively available for you to evaluate," said the user.

Read the entire post here:

Before ending, the user told his followers that whatever he mentioned in the post, was “all readily and objectively available” for them to “evaluate”. As of July 14 (12:49pm IST), Bitcoin price in India stood at Rs. 23.8 lakhs.

Interested in cryptocurrency? We discuss all things crypto with WazirX CEO Nischal Shetty and WeekendInvesting founder Alok Jain on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.

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