3 Questions You Should Ask Yourself Before You Invest in a Cryptocurrency

3 Questions You Should Ask Yourself Before You Invest in a Cryptocurrency

by December 20, 2022

If you’ve just started getting involved with cryptocurrency markets, you might be confused by all the different coins there are out there, and it’s perfectly normal.

There are literally tens of thousands of coins right now with new ones being created every day, and it’s easy to get lost. You can, however, narrow down your choices by doing research on different types of currencies and asking yourself very specific questions. Here are some of the questions you should ask yourself before you invest in a cryptocurrency.

Invest in a Cryptocurrency

image via pexels

What is the Problem it is Trying to Solve?

One of the first things you will have to assess is what the currency is trying to do exactly and if its usage case is demonstrable. Some coins, for instance, are simply there to perform transactions, while others may be necessary to use certain platforms. You also have coins that are not trying to solve anything and are mainly speculative instruments, like DOGE, for instance.

These coins can work for some investors, but their price movement is much more difficult to predict, and their value could go to zero overnight. Picking a coin with a usage case that has been already proven preferably is usually a better option.

What’s the Coin’s Reputation and Historical Price Action?

This question alone could allow you to find tons of great coins to invest in pretty fast. First of all, try to see what the community thinks of a coin before you invest in it. Look at what they think of the people behind the coin, the governance system, and the previous and coming updates that they’ve rolled out. Next, you need to check how the coin has behaved historically.

A coin like Ether, for instance, hasn’t been that low in a good while and is one of the most respected coins in the industry, if not the most. So, it would be wise to check its price action as it is showing all the signs of a coin that could explode anytime soon. If you want to get accurate real-time information on Ether prices, okx.com is a great place to go.

What Type of Coin is it Exactly?

You cannot pick just any type of coin thinking that it will be a good investment. Even if a coin is very popular, that doesn’t mean that it’s because of its earning potential.

Stablecoins, for instance, have the sole purpose of providing a stable crypto asset that allows investors to have easy access to the crypto market without the volatility that comes with normal cryptos. So, take the time to learn whether you’re dealing with a stablecoin, utility coin, payment coin, or a security coin before you invest. And, if you don’t know what these are, you need to do your homework on them.

These questions should be enough for you to build a list of potential cryptocurrencies you could invest in. Once you have a few selections, it would be a good idea to check with the community and see what people have to say about them.


Featured image credit: Pexels