How to gauge cryptocurrency

Take a look at these plans and see what you think. How ambitious is the roadmap? Ambition is good, but there can be too much. Development and releases Just like a roadmap looks into the future, you can look back and see how a project has performed over time in terms of development.

Partnerships In crypto, partnerships are important for assigning value, but make sure you understand the details of the partnership before passing judgment. Demand, tokenomics and utility Price and value are driven by supply and demand.

Theoretically, the larger the demand, the higher the price. Demand is controlled by tokenomics and utility. Look into the tokenomics, which is essentially the economy based around the token. The token should be useful within the ecosystem to create sufficient demand. Evaluate whether the utility is enough to drive future demand, and factor future plans for utility in your decision. How established is the company that controls this project?

If it already has a lot of users that will now use the cryptocurrency in question, that could contribute to value. Whitepaper Whitepapers outline the nitty gritty of a project. They are technical documents, but they are important. They will detail everything you need to know about how it works, which can massively influence your investment decisions. Read whitepapers before investing. Community and reviews Take a dive into the community and read reviews about the project.

See what different people have to say about it. Real world use case This is important. While a project may have great fundamentals, ask yourself whether it has to use blockchain and have its own cryptocurrency.

It could sway long term value, one way or another. Price history and age Cryptocurrencies come and go. It is therefore wise to stay away from trading illiquid coins unless they have garnered a suitable trading mass. Total Volume of an Exchange This refers to the total trading volume of all coins within an exchange.

This is used to gauge the liquidity of an exchange; an exchange with a higher liquidity is better to trade on since there are more market participants and trading activity in that exchange. Additionally, this metric is used to measure the size of the exchange.

All exchanges are ranked according to their volume, exchanges with greater volume equates to them being bigger in size. In order to find the total volume of an exchange, you can visit CoinMarketCap , as can be seen below: The goal is to trade on cryptocurrency exchanges that have a higher trading volume, due to the previously mentioned benefits of liquidity.

BY looking at the table above, you can see that HitBTC has markets as compared to the markets offered by the largest exchange, Binance. A coin may have several markets or trading pairs. A greater overall trading volume signifies an exchange is more liquid. You should always trade on exchanges with a higher trading volume to enjoy better prices and quicker trades.

Fiat-accepting exchanges have lower liquidity due to more stringent regulations, rigid verification process and limited trading pairs. Total Volume of a Trading Pair This refers to the volume associated with a single trading pair. A single coin can have multiple trading pairs since it can be traded with other coins. This is perhaps the most important indicator to look at.

You should always trade the coin pair at the exchange with the highest liquidity. Bid-Ask Spread If you go to any cryptocurrency exchange, you can see an order book that showcases all buy orders created by buyers and sell orders created by sellers. You can assess the bid-ask spread by looking at the order book.

Bid-ask spread is defined as the difference between the bid price and the ask price for a coin. In this case, it is the latter and Bitcoin BTC trading pair on Binance: In any market, sellers would naturally want to sell at a high price to get more profits, while buyers would want to buy at a cheaper price. You can calculate the bid-ask spread by taking the difference of the lowest ask price sell order and the highest bid price buy order.

The most liquid assets have the smallest bid-ask spread while in less liquid markets, the spread between buying and selling prices tend to be much wider. A wider spread in an illiquid market makes it more expensive to trade since you have to pay a premium to buy or sell at a lower price. This is considered quite low.

This means that if you were to buy a larger amount of BCH, you could affect the prices easily, thereby causing great volatility. A greater trading volume for the coin pair means that there are lots of sellers and buyers that are interested to trade the coin pair.

To make an informed investment decision, it is important to know how to analyze cryptocurrencies.

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For a stock prediction algorithm, a company could introduce a new product or service — or remove one from the market — that the code fails to predict. When it comes to a cryptocurrency prediction algorithm, it has to deal with an incredibly volatile commodity and a market that is the subject to forces including, but not limited to, regulation, changes in availability and the overwhelming dominance of bitcoin.

Who uses algorithms? Plenty of sites give out price predictions based on algorithms. We asked Gov Capital, PricePrediction. The basic premise of machine learning is to build algorithms that can receive input data and use statistical analysis to predict an output value within an acceptable range.

It is, therefore, very difficult to give an accurate estimate of the future. WalletInvestor's cryptocurrency and other forecasts are based on changes in the exchange rates, trade volumes, volatilities of the past period and other important economic aspects. For instance, CoinCodex has a range of forecasts based on how much certain other parts of the tech world are expected to grow.

The site makes predictions based on Google, Facebook, mobile phone usage and the growth of the internet in general. The site also uses a range of technical analytic tools — such as the daily simple moving average, daily exponential moving average, weekly simple moving average and weekly exponential moving average — to make predictions. That said, it is worth pointing out that the site does hedge its bets somewhat, giving a range of prices for each indicator based on how long they are used for.

Another tool you can use is to gauge the market sentiment to see whether investors are optimistic or pessimistic about dogecoin. That is certainly possible, although you will need a not inconsiderable amount of technological knowhow. For instance, AI expert Venelin Valkov has created his own system to predict the price of bitcoin. Put relatively simply, he has taken 3, previous BTC prices and sorted them by time, split into equal intervals.

Then, he says, he uses something called a deep neural network. This is — again, put extremely simply — a program that operates on several layers. The idea behind it is for the network to recognise past patterns and then come up with its own prediction based on those patterns. Anyway, Valkov suggests using the network, which in effect you make yourself, to create your own bitcoin price forecast.

Theoretically, this should also work for other cryptocurrencies. This does assume, of course, that you have the advanced computing skills that you will need to create the algorithm in which to feed the relevant data. Making a cryptocurrency prediction algorithm is a complex task and one which requires a certain amount of skill.

If there is no defined road map, or if the milestones are too generic, this is a red flag. Research Reputation There are tens of thousands of cryptocurrencies, and unfortunately, some of them are scams designed to get the founders and early investors rich. Researching the reputation of the team and leadership of a cryptocurrency can help investors understand if the crypto project is reputable or not. There are several places to learn about the reputation of a cryptocurrency project, from Reddit forums to Discord channels and social media accounts.

Ask around these online communities to get a feel for the industry reputation of key leaders on the project, as well as the perception of that project. If there are lots of negative responses to questions about a key leadership member or the project as a whole, this could be a red flag.

Reputation is also established by researching who is supporting a project. If there are reputable investors already on board, as well as institutional backing, the project may have a greater chance at success. This is important, as it affects the overall price of a cryptocurrency over time. Similar to shares of stock in a publicly traded company, the price of a given cryptocurrency is a reflection of supply and demand. The more shares there are, the more demand there needs to be to increase the price.

Here are three important data points to review before investing in any cryptocurrency: Circulating supply. This is the supply of a cryptocurrency that is currently in the market, and what current prices are based on. Total supply. This is the total supply of a given cryptocurrency after all tokens are unlocked and distributed. Maximum supply. Many cryptocurrencies allow the minting of new tokens, and the maximum supply is the maximum amount of tokens that will ever be minted.

All three of these statistics can greatly affect the price of a given cryptocurrency, so understanding supply is very important for cryptocurrency investors. Crypto projects are also notorious for an uneven distribution of tokens, meaning that the token supply is low at launch and then increases substantially over time.

This can cause a significant drop in price as the new tokens to flood the market. Reviewing the token unlock schedule can help investors understand how the tokens will be distributed, and to whom. Review the Price Data Crypto prices are known to swing up and down wildly, but there are many factors that cause this.

Token supply, marketing efforts, project milestones, and many other factors can greatly influence the price of a given cryptocurrency. Reviewing the price history of a cryptocurrency can help investors see how interest in the project has evolved over time. It can also indicate whether a given crypto project is growing or dying. If a cryptocurrency had a huge spike in price but never recovered over the coming months and years, this can be a red flag for investors.

The same goes for market capitalization and trading volume. If the market cap continues to decline the longer that the crypto has been around, and if there is no trading volume, then the project may be a poor investment. What are cryptocurrencies? Cryptocurrencies are digital currencies that are not controlled or supported by any central authority like banks.

Instead, transactions and ownership data are stored through distributed ledger technology, such as a blockchain. Is investing in crypto safe? Cryptocurrency can be a smaller part of a larger investment portfolio , characterized as a risky asset with more volatility than most investments.

What are the popular cryptocurrencies? There are many popular cryptocurrencies on the market, but the simplest way to gauge the popularity of a given cryptocurrency is market capitalization.

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