What I consider before diving into a project

in LeoFinance4 months ago

Hello, my dear Hive fellows, often I come to the question of which project is the best to invest but never i could tell everything in detail to consider. Here in this post, I am going to share my point of view on choosing a good crypto project. Great projects like LUNA have indeed been destroyed, so nothing is concrete here but learning is never a bad idea. Choosing the "best" cryptocurrency for investing is a difficult task that requires so many observations over many years.

The most important thing is to consider the problem the cryptocurrency solves. Does it offer a unique solution or improvement over existing systems? For instance, Solana's focus on scalability and speed addresses some limitations of other blockchain networks. Adaptability is also important to think about if the cryptocurrency can evolve and adapt to changing market demands and technological advancements.

Another factor to consider is the growth of the project. Can the platform handle substantial transaction volumes and increasing demand without the risk of security or decentralization issues? For example, Ethereum's scalability issues are to be solved for massive growth. It is also important to check if the technology has a vast market, and if is there space for significant user adoption in the future. Without mass adoption, no project can shine in the long run.

The security of the blockchain is also very important which explains how are transactions validated and safeguarded using the consensus mechanism. Proof of Work (PoW) in Bitcoin vs. Proof of Stake (PoS) in Ethereum is the pioneer in such technologies with amazing security though Ethereum has more risk than BTC for the staking mechanism. So it is important to verify if the blockchain architecture is efficient and safe against attacks. A robust and active developer community continually enhances the platform which is also very necessary for the crypto project.

Another major concern for the crypto project is the true decentralization of the blockchain which will ensure fair ownership and distribution. It is necessary to ensure that whether cryptocurrency is broadly dispersed or concentrated in the hands of a few whales. In that sense, Bitcoin has a broader dispersion than other younger currencies that are listed in the market. For other technologies, governance mechanism is crucial to consider to find how are platform choices made. Is it genuinely decentralized, or is a tiny clique in charge? Also to verify can centralized authority quickly shut down or manage the network of the project? BTC is great from that perspective but coins like STEEM, TRX are not good at all.

Hacking vulnerability is very important to consider before going for a crypto project. You must ensure that has the crypto platform already encountered security breaches. Are there any known flaws that can cause a huge loss of your fund? A good project must ensure transaction safety without any risk. It is necessary to check if transmitting and receiving network transactions are secure without fear of loss or theft.

Manipulation is an age-old filthy game int he crypto space which should be kept in mind for choosing a good project. There are many pump-and-dump schemes in the space such as the recent TRB has shown massive growth and massive drop through the manipulation. So, be ensured that coordinated buying and selling activity greatly influences the price or it is safe and organic buying and selling is happening. Another example is Dogecoin's rapid surge and eventual fall which was a manipulation from Elon. Is there artificial volume produced by bogus transactions to raise the price? For example, certain exchanges are concerned about wash trading.

The adequate liquidity of a cryptocurrency is very necessary to sustain and get mass adoption. For adequate liquidity, the trading volume is to be noticed carefully. How straightforward is purchasing and selling cryptocurrencies on exchanges? For example, Bitcoin's strong liquidity proves it is the king of cryptocurrency in comparison to any other coins or tokens. Also, it is necessary to check the depth of the order book which shows the realtime scenario, is the order book deep enough to purchase or sell huge quantities without substantially affecting the price? For example, in less liquid markets, thin-order books exist.

Also, it is important to check the availability of exchange: Is the coin available on trustworthy and secure exchanges? It is not suggested to trade on unregulated or unscrupulous exchanges. It is also necessary to explore what percentage of shops and companies accept the specific crypto as payment. The increasing merchant acceptance of Bitcoin shows its great future.

Real-world applications are a great criterion to consider if the cryptocurrency is being utilized for its intended purpose. For instance, Bitcoin is a store of wealth vs Ethereum for smart contracts, and both are very useful for many applications. It is also important to think about the community of the project, and how big it is.

Total supply and distribution are also important factors to consider a crypto to invest. How many coins are now in circulation, and how many will be made in the future? Such as Bitcoin has a finite quantity of 21 million coins, but Ethereum has a limitless supply which should be kept in mind before entering into it. Who has the most number of coins? Is the distribution concentrated or equally distributed? There are concerns regarding whale manipulation in various markets, especially where most of the coins or tokens are accumulated in a less number of hands. It is also important to verify whether is there a method in the protocol to lower the circulating quantity over time, possibly raising the value of the remaining coins. For example, Ethereum's EIP-1559 fee burning is a great mechanism to pull back its supply to sustain the market demand.

Finally, the number of cryptocurrency holders is a very important factor to consider in an investment into the project. How many people possess the cryptocurrency? A more extensive distribution with active interaction is often a good indicator. Besides, it is necessary to analyze the Holder types including Individual investors, institutions, or whales who own the coins. Each group has distinct investing patterns that might influence price volatility.

There must be a plan for whether to invest for a long-term or short-term period which can be also considered with the market trend analysis to dive into a project. It is better to go with low market cap coins for the short-term but with high market cap for long-term planning.

What are your thoughts on that, let us know for mutual growth. Thank you so much for your time and attention. I will catch you at the next.
Have a nice day!

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Dear @tanzil2024 !

Hassan!

I felt that investing in cryptocurrency was similar to investing in stocks!

Almost, but the crypto market is more unstable and volatile!