How do you value a cryptocurrency and what factors do we look for in a currencies' success?
I'll be honest this question is the first thing I asked myself when I started trading in crypto.
I've heard all types of explanations but the main three things you have to account for is this:
(In importance)
- Market Share
- Application/use
- Technology
The market share is the biggest factor with any currency because like any product a currency needs to be recognized for it to be used or to have value. This is pertinent to remember because many cryptocurrencies have great tech, but they just haven't garnered enough market share to be successful. Ergo, what we want to be looking for first is the cryptocurrency that has produced major market share and then move down to it's strengths in tech that intrigue investment. Two examples of cryptos with huge market share of course are Ethereum and Bitcoin.
So after we've assessed market share we then need to assess the quality of technology and it's use (which pretty much go hand in hand). Why are we doing this? Well basically to scope the currencies prospects in the long term; because on any investment in order to minimize risk we should be willing to hold it for the long term despite fluctuations in price. Investors should try to find a crypto that has practical use as well as visionary tech and management. Whatever strengthens the argument that the crypto you are researching will be implemented in the long term, as well as the more recognition for it's technical advancements; take note. The more notes you can take the stronger the interest to buy. An example of a crypto building market share with advancements in tech is Litecoin.
Anyways that's just a rough summary on valuing currencies, of course you need to take into account growth and maturity before investing, as well as observing trends in price and market.
***Growth: how much or how fast it's growing
***Maturity: how old is the currency
***Trends: bull or bear
Thank you for reading there will be more content to fill your investment needs shortly :).