Which cryptocurrency to invest in? – Introduction
Which cryptocurrency to invest in? The answer to this question is far from simple, especially since there are currently a high number of options in the cryptocurrency market. As such, it is very important to surround yourself with the best information to evaluate these assets.
Consequently, we have prepared this article, in which we list important cryptocurrencies in the market today. In addition, we will demonstrate which factors should be taken into account when making your choice of investment. Keep on reading it.
What are the potential cryptocurrencies available on the market?
Bitcoin is the most prominent cryptocurrency on the market, seeing it was the first to be developed and the one with the highest trading volume. However, as previously highlighted, there are many others in circulation, which also deserve to be known by those looking for this type of asset.
So, let’s see a brief description of what are the main cryptocurrencies to invest.
Bitcoin
The development of bitcoin dates back to 2008, when its developer, Satoshi Nakamoto, published an article explaining the concept of this cryptocurrency so that, months later, he could launch his system.
As many already know, the emergence of bitcoin was something absolutely innovative, since it became demonstrated, in practice, that it is not necessary to have intermediaries to safely carry out monetary transactions.
Therefore, it is a technology with the potential to completely reconfigure our financial system.
The system upon which bitcoin was based is called peer-to-peer. This means that it is a decentralized electronic currency that any computer is capable of offering.
Another key component of bitcoin is blockchain technology, which allows the currency to be a distributed ledger (with multiple layers of verification). Due to this distributed nature, blockchain transactions are verified by the understanding of each member, offering security and trust to transactions, which do not require a centralizing counterparty.
Ethereum
Ethereum is a decentralized platform, associated with a number of features. Its big difference is performing applications that can be operated free of any kind of interference or fraud.
These apps run on a public blockchain, which has a global extension infrastructure, capable of assigning ownership of financial assets to anyone.
This configuration allows developers to create markets for asset trading, information warehouses to file debt securities, and move funds according to preconceived instructions (eg, wills and futures contracts). And most importantly: everything safely and with no counterparty requirement to carry out transactions.
Ethereum is an initiative of an eponymous Swiss Foundation and has been in operation since 2014. As it is an open source project, it has the collaboration of thousands of highly active developers around the world.
Tether
The USD tether (Dollar tether or USDT) is a stablecoin – also called stable currencies – with collateralization in fiat currencies, called IOU currencies (“I owe you”). In practice, this means that all collateralization carried out with this currency comes exclusively from company funds.
Collateralization is the act by which a debtor offers a certain asset to the creditor as a guarantee of payment of the obligation, for those who do not know and, thus, preventing situations of financial default (non-compliance with legal obligations).
In a very simplified way, we can explain this operation as follows: for every 1 USDT created, the tether managing company needs to have US$ 1 in its bank reserves. This would be a way to ensure that there are the necessary resources for all of the tether’s investors.
Tether’s main goal is to create a kind of connection between the traditional financial sector and cryptocurrencies, which is an asset widely used for transactions between large companies and to facilitate dollar purchase.
What to assess when investing in cryptocurrencies?
Now let’s see what to analyze when investing in cryptocurrencies:
Understand how cryptocurrency works
As previously mentioned, each cryptocurrency works in a different way, to fulfill a certain purpose. To illustrate, we listed several distinguished types of assets development, as well as its advantages and purposes.
This fact brings us to ponder on the necessity of knowing the functioning and characteristics of each cryptocurrency. In this sense, some aspects must be taken into account, such as:
- Type of development;
- Cryptocurrency purpose and
- Potential for large-scale use
Seek to know details about the community
The developer community is certainly a major factor in the success of a cryptocurrency. After all, the more qualified the pool of professionals is, the bigger the chances of reaching an asset with great marketing potential.
Thus, if possible, seek to know the project’s execution in its details, in all its fronts, not only regarding development. For instance, it must be taken into account that the established community around cryptocurrency also needs to worry about publicizing it to potential users, in order to spread information these potential users about the cryptocurrency market.
Identify what is the currency trading volume
To whoever is intending to invest in cryptocurrency, it is quite valid to identify the trading volume of the asset. This is because the asset trading volume is a factor that indicates the currency’s trading potential, which is very relevant for future investors.
However, we must clarify that trading volume is not everything. After all, we may have very promising development projects that have not yet become “popular”.
Imagine, as an illustration, those who invested in bitcoin around 2010, when cryptocurrencies were still unknown.
Those who acquired this asset around that time certainly made good profits, even with a low trading volume at the time of purchase.
Did you like to know more about what to analyze when investing in cryptocurrencies? Enjoy and check out more content about the universe of cryptocurrencies on our blog!
