Cryptocurrency markets are becoming increasingly compared to the mood of dоtсom businesses at the turn of the century, as values rise to new highs. Companies that did not have a business strategy and had multi-million dollar valuations went bankrupt when the craze subsided.
There is a lot of overlap between the cryptocurrency markets. It is unknown how many of the 1,385 coins currently available on the market are worth, but they are being bid up to multi-billiоn dollar prices. Dogecoin, a virtual currency created as a byproduct of the Bitcoin boom, has a market capitalization of $11 million as of this writing. The lack of a clearly defined use case or attribute justifies the coin’s value.
According to Nolan Bauerle, a research director at CoinDesk, about 90% of today’s cryptocurrencies will not survive a market crisis. They will have the upper hand when it comes to the game, which means they’ll earn more money for their early investments. It is noteworthy that if the $10 trillion markets for cryptocurrencies are accurate, these gains are possible.
However, It is more difficult than it appears to identify survivors in the cryptocurrency markets. No currency can achieve or even come close to meeting its mainstream acceptance. Even the most valuable and widely used cryptocurrency in the world, Bitcoin, is plagued by scalability issues, such as high transaction fees and slow networks, which limit its use.
According to Christopher Grey, co-founder of enterprise software firm CapLinked, investors should focus their efforts on three key areas before investing in the asset class.
In the first place, there is the knowledge and experience of the research and project teams. Cryptocurrencies and blockchains are still in their infancy, but their roots can be found in well-established parts of the world. For example, Ethereum’s small contract tokens are used to link pieces within pre-established sections. Because of this, prior experience is critical.
A prudent investor will ask, “How do their prior accomplishments qualify them for this project?” Because no one on the team has any experience with cryptocurrency or the blockchain. Are they at the very least employed by the same company? Wonders of the gray variety.
The terms of the agreements should be read by investors as well. Two crucial factors to consider in this regard are the amount raised and how much of it is distributed to investors. In this case, the traditional parameters for valuing equities do not apply. In other words, this is because the traditional market assumptions that founders must first establish a sustainable customer base and achieve success with their product have been reversed in the Bitcoin marketplaces.
Also, investors must take into account the technology. You will be relying solely on the team to succeed if it is just an idea or a white pager, Grey says. “And, of course, that means that the team must be great.” Why does a product work if it was created by a team?
Which Cryptocurrencies Will Survive In The Long Run?
The top 20 most widely traded cryptocurrencies are a good place to begin. Some notable survivors will be easy to spot in this list if and when the cryptocurrency market crashes. Since its inception as the first cryptocurrency, Bitcoin has quickly grown in popularity as a store of value.
Litecoin and Bitcoin Cash were offshoots of its blockchain and codebase, respectively. To be the most popular cryptocurrency for everyday transactions, they’re both competing. In the Ethereum world of decentralized applications, or Dарpps, the flоod of tokens established on its platform is quickly gaining attention, and Ethereum is to blame for it.
There are others, like DASH, who have taken similar claims and carved out niches in both emerging and developed markets, like Zimbаbwe and Sраin.
A dark horsing has the potential to be NEO forte. AnNEO’st is cooperating with the Chinese government to expand the country’s cryptocurrency ecosystem toward a smart economy. As well as working with the Japanese Ministry of Economy, Microsoft Japan has established a strategic partnership.
Moving down the list, on the other hand, reveals cryptocurrencies that require investors to have a higher tolerance for risk. TRN, for example, a cryptocurrency that has recently gained popularity but lacks a product and has an unskilled developer, is an example.
Although that vision was recently shifted from a web-based money transfer aggregation service, Request Network claims to represent the future of commerce. The white paper for the cryptocurrency mentions a wide range of applications for the coin, ranging from the Internet of Things (IoT) to online payments and integrating business logic for governmental legislative purposes.
However, the start-up has very little to show in terms of collaborations or experiences in these areas.
How To Avoid Trading Cryptocurrencies That Fail
There is no foolproof way to avoid a cryptocurrency scam. Cryptocurrency investments are always high-risk, even for experienced developers with a long history of success. Cryptocurrencies linked to health issues can be identified using these questions, on the other hand
1. Is It A Joke Coin?
Making memes and mucking up some of the more bizarre characteristics of the industry are both possible with joke coins. As a result, if you’re hoping to find the next Dogecоin, you might be likely doomed to disappointment. Since a large portion of funny coins fails, we don’t know how the Dogecoin narrative will turn out.
2. Who Are The Founders Of The Coin?
If you can’t figure out who is behind a coin you want to invest in, that should be a big red flag. Be sure to check with those who created the coins to ensure that they haven’t previously been involved in any scams. Having worked on successful Bitcoin initiatives is a huge plus.
3. Where Is It Listed?
Some security is provided by choosing coins that are listed on the most popular cryptocurrency exchanges. Even though these sites do their due diligence on the cryptocurrencies they list, they may succumb to market pressure if a particular cryptocurrency becomes particularly popular.
4. Is Its Website And Social Media Active?
Idle Twitter feeds and a website that hasn’t been updated in a long time are both obvious signs of a failing coin. To get a clearer picture of where your money is going, get involved in the community of the coin you want to buy.
It is a sad fact of investing that some endeavors will fall short of expectations. You should only invest as much money as you’re willing to lose and do as much research before putting your hard-earned money into a venture.