Today, almost everyone knows what a cryptocurrency is. But not everyone knows how to choose the right cryptocurrency for successful trading.
According to CoinMarketCap, the number of cryptocurrencies exceeds 4500. All of them differ in prices, trading volumes, capitalization and popularity. For example, it turns out that the most valuable asset is 42-coin, which has an exchange rate of about $90,000. But it is not suitable for trading. The main reason why this coin is not listed on many exchanges is its low liquidity.
Thus, you will come to the conclusion that of all the assets, only about a dozen are actually used for trading. So, which pairs of cryptocurrencies to trade? How to choose them correctly? Let’s look at it below.
People have long invested in fiat currencies and often make windfall profits when prices fluctuate. As soon as the cryptocurrency appeared as a means of payment, platforms began to appear for its safe exchange for fiat money and vice versa. This is how crypto trading was born.
The volatility of fiat currencies is nothing compared to the almost bizarre fluctuations that occur in the cryptocurrency markets. This risk also results in higher returns than usual. This is what makes cryptocurrencies a fickle but extremely profitable investment vehicle. So how do you choose which cryptocurrency to bet on to create wealth and long-term value?
Which cryptocurrency is best for trading
One of the trading challenges faced on cryptocurrency exchanges is asset volatility. The price of bitcoin, ether, litecoin, etc., can change every second. Hence the problem for a beginner or not particularly advanced trader: any type of trading (spot, futures, margin) requires the ability to catch trends, analyze assets using technical analysis tools.
As with traditional stocks on the stock exchange, choosing an asset to invest with a strong chance of growth is an important issue.
“Blue chips”, which are talked about everywhere and everywhere by various consultants and others like them, are still an investment asset, which, however, may well sink noticeably in price immediately after the acquisition.
The most profitable cryptocurrencies for trading or investing are the following:
Relatively young, who have not yet determined the final boundaries of their relevance. After bitcoin, which turned out to be very limited in use with the blockchain, developers are implementing new developments as universal as possible, such as Ethereum. It is a whole environment for developers of various applications on the blockchain and even for creating new cryptocurrencies.
Having sufficient popularity among traders on the selected site. Liquidity is one of the main assistants of every trader. Without a sufficient amount of it, it will not be possible to quickly invest in the instrument, since there will be no offers to sell it. The same applies to the need to get rid of the asset at the peak of the price, since there will be no one willing to buy it.
Anonymity. The issue is morally debatable. Many modern innovations provide users with complete anonymity. Unfortunately, the greatest popularity of such assets falls on the darknet, where anonymous coins can be used to buy prohibited items and / or services. But our view, from the side of the trader, makes such assets interesting, because they are popular, there is always a demand for them, and so on.
present at various venues. Arbitrage when trading cryptocurrencies is a common thing. There is no centralized market, as in forex or stock instruments. A group of developers or a company creates a platform for the exchange of fiat money and crypto-instruments between clients. It is the supply and demand of these customers that form the price of the cryptocurrency.
Depending on the number of traders on each of the sites, their activity and attention to the selected instrument, its price is formed. It can vary by tens of dollars, which allows you to transfer cryptocurrencies from site to site and sell quickly and expensively.
Inexpensive. There are two options here. The first is completely new instruments that may well shoot up in price or their mining is difficult for one reason or another. The second is assets that are in a rollback or the trend has reversed and the price, in your opinion, has reached the bottom. Both options will bring more profit than instruments whose value has already been determined, as well as the price. The same laws apply here as in traditional Forex.
It is also worth paying attention to the following criteria for choosing the right cryptocurrency:
certain market capitalization;
large trading volume;
high circulation flow.
Luckily, there is a ton of information on the web to help you choose which set of cryptocurrencies you can invest your money in to get the best return on your investment.
All traders enter the market only after a serious analysis. First, they do a fundamental analysis of several cryptocurrencies in order to choose an asset that can bring the maximum profit. They then perform technical analysis to understand trends and market behavior.
However, these analyzes are not enough to start trading.It seems that it is not difficult, but if you choose the wrong pair, the profit will be less, and even losses are possible.
What to buy
Decide what you want from the deal.
If this is a quick profit at a relatively low cost, then attention should be paid to those instruments that show high volatility during the day or a serious price run between the sites.
Also, don’t forget about liquidity. With a very large volume of purchases, the price can rise significantly until the end of the buying process. On the other hand, at an adequate price, there may simply not be so many offers.
If the goal is a competent investment of funds for a medium (up to six months) and long-term (from a year) period, the analysis of a potential asset must be done very carefully. Study the mood of the developers and the prospects they promised.