Investing in crypto is a lucrative proposition even in the bearish market 2023. However, how will you know when the market changes? How will you recognize an upcoming trend and know how to seize an opportunity when it presents itself?
The answer is simple; you do your homework.
Still, what things should an average crypto investor look out for? To help you get started, here are the top ten factors you should focus on.
1. Market capitalization
Market capitalization is the value of all cryptocurrencies in a market combined. This shows how well a certain cryptocurrency performs, especially if you compare the market capitalization historically.
You can easily use market capitalization as a metric when comparing two cryptocurrencies. This way, you see how much money/coin is in circulation. A larger market cap usually means the token is better established and boasts higher stability.
Capitalization is constantly changing, and by tracking it, you can see how the token is currently performing. For instance, the market cap of Bitcoin is currently over $540 billion. On the other hand, Ethereum’s market cap is at $230 billion. These two market caps are the highest in the field, as these two cryptocurrencies are the biggest and the most popular cryptos.
2. New cryptocurrencies
Next, you need to consider the newest cryptocurrencies on the market. By recognizing a promising token, you can enjoy the benefit of early adoption. To understand this, imagine people who bought Bitcoin while it was still $1 to $10.
The chances of recognizing a great new cryptocurrency are not that great. Many are released yearly, and most have a promising concept (especially utility coins).
The key thing to remember is that you don’t expect these coins to explode overnight. You’re looking for tokens with great long-term potential with the idea of sitting on buying and sitting on them for a while.
You should invest the money that you know you can live without. Even if it pays off, your money will be immobilized for months (perhaps years). Positional investing is when you make an investment and forget about it.
3. Community sentiment
Like any other market, the value of crypto is determined by community sentiment. Now, this sentiment can come in several forms:
Positive sentiment: A lot of people believe that cryptos are the future. A low-fee currency that provides complete anonymity and works well in the international market is always a great idea.
- Negative sentiment: Many people are skeptical of crypto, even going as far as to accuse the entire field of being nothing but a Ponzi scheme.
- Bullish sentiment: This sentiment consists of investors who believe the market is in a good position and improving.
- Bearish sentiment: This sentiment consists of people skeptical about the market’s current and future (at least the nearest future) state.
- The key to remember is that a prevalent public sentiment determines the market’s direction and shifts over time.
4. News surrounding regulations
Most countries, regions, and government institutions have yet to regulate crypto. Even the long-awaited MiCA (which is supposed to regulate crypto on the EU market) is still in its draft stage. Needless to say that anything EU-related also affects related markets and economies.
The worst thing is that the U.S. is yet to catch up with the EU. Their stance on crypto may be better or worse, but one thing that torments the investors is that they have no clue what the future brings. There are various speculations out there, which is why it’s so important that you keep track of this news.
China, for instance, has enacted a ban on all crypto. This has scared many people because it was one of the largest crypto markets. Still, this doesn’t mean all Chinese crypto holders are out of the game.
5. News of hacks and cybersecurity
While crypto is a lot safer than people give it credit for, there were many instances of incidents in the past:
- Mt Gox (2014)
- Bitfinex (2016)
- Coincheck (2018)
- Binance hack (2019)
Now, while this may sound both terrifying and recurring, the important thing is that you don’t have the right frame of reference. What does this mean? When such a thing happens to a major (traditional) financial institution, it doesn’t hit the front page. However, when this happens in the crypto field, it immediately becomes the talk of the town.
You need to keep track of this (as well as any scandals) because it may cause public (selling) hysteria. You want to be ready and learn how to always predict these trends.
6. Searching for top-traders
Identifying top traders is essential for those who want to take advantage of the concept known as copy-trading. What is copy-trading? This is a concept where you identify a successful trader and set up your platform to copy their trades.
This is automatic, and it’s great for first-timers to learn from the example of more experienced traders. Sure, they say you learn the best from your mistakes, but this learning methodology would be too expensive for trading. Instead, you want to copy others until you can stand independently.
Two downsides are the lack of self-reliance and the fact that most platforms charge a fee.
7. Market dominance
The next thing you want to keep track of is the market dominance. As mentioned, Bitcoin and Ethereum dominate the market, but other players are in the game. Why not track how they change their rank and position?
It’s also about many new tokens operating on these platforms. For instance, you’ll hear that a new utility coin operates on the Ethereum blockchain. This means it feeds directly into this network and affects Ethereum’s market cap, but any change to Ethereum will affect it.
In this scenario, watching out for Ethereum 2.0 would be a smart move.
8. News regarding exchanges and markets
The state of exchanges is also quite important. People first want to hear about the liquidity, which changes over time.
Second, since people keep assets on these platforms, there must be no security breaches. A major breach could cause people to abandon an exchange in droves.
Then, there are some strictly subjective issues like interface and user experience. Keep in mind that these platforms are always in development. Their interface may change over time, but these marketplaces and exchanges will likely keep some of the most recognizable visual markers for the long run.
9. Development activity
Tracking this is harder than it looks. You need to start with the official channel (the team behind the crypto) but also realize that it’s not in their best interest to disclose all the negative news. So, you’ll need alternative sources and a closer look at what’s available.
Another thing you want to pay close attention to is their partners and associates. Track records of entities they associate with will discover quite a bit about their platform.
More often than not, you’ll have access to the developer community. Here, people will ask questions and share their conclusions about the project. You would be surprised to learn just how insightful this can be.
10. Real-world use
Unlike fiat, which is government-issued bonds, most cryptocurrencies have real-world value. This real-world value can reflect on their market value. For instance, we’ve already mentioned that Ethereum is a blockchain platform that allows the development of many different currencies and apps. It’s also invaluable in the development of smart contracts.
Bitcoin is the biggest cryptocurrency, and there are a lot of regions that already use it as a hedge against inflation. It is also introduced as a means of payment by more and more businesses and organizations.
Moreover, Ripple specializes in low-fee cross-border transactions, which makes it ideal for remittances. This platform has a huge potential because global remittances are 18.6% of all digital transactions. Keep an eye on this.
By staying informed, you will make your crypto investment decisions data-based and your profits more consistent
In the end, while keeping track of these ten factors won’t ensure a successful investment, it will ensure you know what you’re doing. This way, you’ll act like an investor, not a gambler, which is already a great start