The Crypto industry has several thousands of tokens. Many of these tokens are available for trading through Crypto exchanges. But with more options, it becomes difficult to spot the diamonds in the dust. In this blog, we will detail a strategic approach to selecting a Crypto token and the factors you can consider before deciding to invest. Do note that this is not an exhaustive list and has been recommended based on internal analysis at ZebPay. This list can also be subject to change.
Understanding a few key parameters before Investing
Let us dive into a few factors to consider before deciding to invest in Crypto.
This is often an overlooked aspect in the retail segment because of the amount of time it takes. Often retail investors end up investing because of a recommendation from a friend or an influencer. It is imperative that one fully understands the nuances of the crypto industry before investing. Research is often interpreted as an extensive exercise. But, research can also be simple if done strategically.
One can start by analyzing the top 10 or top 15 Crypto coins by market capitalization. Understand what these tokens aim to achieve and the motivation which drives these crypto communities. A few aspects which can be considered within market research are 1) Tokenomics of the Coin 2) Centralization vs. Decentralization of the token community 3) Fundamental goals of the Crypto 4) Developer activity 5) Security of the blockchain 6) Real-world applications of the token.
Having clear investment goals:
This process involves deciding the objective of the investment and the potential time frame to stay invested. To maximise benefits from investing, it is important to be flexible and assess market conditions. The reason why flexibility is critical is that, no matter how experienced an investor is, he or she is always susceptible to market movements. Therefore, it is not an ideal strategy to buy and hold an asset forever but at the same time, one needs to give time for an asset to appreciate.
Most importantly, an investor needs to make an assessment of their financial goals and analyze how a certain investment can help them achieve those goals.
Take a sectorial approach:
Taking a sectorial approach can help you identify undervalued tokens and help you pick the jewels. Identifying these good tokens before the rest of the market can help you reap tremendous returns if done strategically. For example, The growth of Bitcoin since 2009 has been astronomical. An early investor who understood the tokenomics and philosophy of Bitcoin could have taken a position and reaped the benefits.
Therefore, it is essential to research each sector within the Crypto space. Some sectors include- Decentralised Finance, Metaverse, Gaming, Smart Contracts etc. Each of these sectors can potentially have good tokens, and identifying these tokens through research can give an investor the edge.
Approach an expert if required:
If you are not convinced by the research and information at your disposal, it is advisable to approach a subject matter expert for an opinion. But do note that in the end it is your hard-earned money which you will be investing, so it is important to own your decisions.
Navigating the crypto market requires a blend of diligence, sector-specific knowledge, and careful consideration of personal financial goals. Remember that every investment decision carries risks, and it’s crucial to take ownership of your choices in the crypto space. By doing so, you can increase your chances of spotting potential gems amidst the vast array of options.
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