Blockchain aficionados know the instructive “two-pizza story,” which today is worth nearly $400 million. In the pursuit of wealth, many cryptocurrency exchange players mindlessly purchase tokens and then go bust. The Internet is replete with hundreds of headlines about how amateur traders lost their fortunes and got into debt by buying deliberately unprofitable digital assets. Trading promising cryptocurrencies is a whole science that takes years to comprehend. Let’s try to understand the basics of profitable acquisition of coins and their subsequent resale.
Novice traders know that the blockchain world is not limited to Bitcoin, Ripple and Ethereum. Hundreds of cryptocurrencies with low or high volatility are involved in daily trading. For example, the largest exchange Coin base has over 9,000 digital coins.
More than 400 tokens are available on Finance, and about 350 on FTX. According to CoinMarketCap statistics (the resource tracks changes in blockchain asset quotes), there are 17,500 cryptocurrencies in the world. This number is gradually increasing, since 2-5 coins are issued daily in the virtual space. The most promising cryptocurrency is open on the screen.
Short-term speculation or long-term investment?
The main task of short-term speculation is to choose the optimal moment for buying and selling coins. Since modern digital assets are subject to a high level of volatility (changes in quotes), the slightest doubt of investors about the reliability of their investments provokes panic.
It is followed by a reset of assets, which affects the value of some tokens. The task of the player in this case is to catch the bottom of the market, acquire assets and wait for the increase in value. This is the so-called “bullish trend” in trading.
When playing on the stock exchange, it is important to exit the asset in time, dropping it at the highest price. To do this, it is necessary to constantly monitor quote trends, carry out fundamental and technical analysis, and adhere to certain trading strategies. It will not be superfluous to use intuition, if it is developed. Carefully monitor the news on the asset, because even a false rumor affects the mood of digital coin holders. The desire to get rid of cryptocurrencies at the peak of value is called the “bearish trend” in trading.
Long-term investing is more rewarding and easier to predict. From this it follows that the period of being on the stock exchange is more important than numerous attempts to catch luck by the tail. Without going into details, it sounds like “buy and hold.” If an asset is of value to humanity, its value will inevitably rise. Experts recommend building a portfolio of promising cryptocurrencies, and time will put everything in its place.
Selection by capitalization
A novice trader should make a choice in favor of a digital asset based on capitalization. In simple words, this is the amount of finance that market participants have invested in the coin. The higher the capitalization, the more stable the interest in the cryptocurrency and the more stable its quotes. In accordance with the above factor, three promising coins for investment are distinguished in 2022:
Ethereum (capitalization $475 billion);
Polka dot (capitalization $27 billion);
Cosmos (capitalization $5 billion).
The main advantage of cryptocurrencies is exchange automation and smart contracts. Changing the method of proof of work from Pow to Pops will increase the functionality of Ethereum, attract new investors, and provoke an increase in asset quotes. Many experts are of the opinion that the future of the blockchain is not with Bitcoin, but with Ethereum.
The Polka dot coin is called the “killer” of Ethereum. After the launch of the prochain ecosystem, it is expected that the value of the token will skyrocket several times. Cryptocurrency Cosmos is a cross-chain solution. They will become a platform for the development of innovative services, which will lead to the opening of “blockchain 3.0”. There are 250 applications in the Cosmos ecosystem with a total capitalization of over $250 billion.
The current rating of cryptocurrencies by their capitalization can be tracked in the interactive table below.
Fundamental analysis of projects
The cryptocurrency market is young and volatile, so applying technical analysis to it makes no sense. Fundamental research comes to the fore, which has several features. The assessment of the situation on the stock exchange is made as a whole, that is, on the basis of certain events. It is noteworthy that the same information can affect the quotes of individual cryptocurrencies in different ways. For example, the news about the fork of Bitcoin increased its value and lowered the price of Ethereum.
Cryptocurrency quotes are influenced by the following fundamental factors:
stock reports (trends for a fall or increase in the value of an asset);
accession of new participants (investment);
legislative innovations and restrictions;
Not any information is a reason to buy or sell a coin. The effect of “pumping” (pumping), which occurs due to rumors or fakes, quickly passes, and quotes return to a stable course. The circulating supply and inflation rates can also influence the decision to buy digital assets. If the number of tokens in the ecosystem is gradually reduced, they will a priori increase in value.