Demand for cryptocurrencies is skyrocketing as several personalities have shown their interests in these assets. However, one should understand that as an investor there are several factors to consider before parking the hard-earned money into these.
Here are some of them:
Identifying the right cryptocurrency
According to Kumar Gaurav- founder and CEO- Cashaa- crypto-friendly neobank, the investor needs to first understand that the coins with market valuation already touching the threshold might not grow further, or at least not at the same pace.
Thus, as per Gaurav, one needs to identify the coins that still hold potential and can go rocket anytime.
The second very important factor is legitimacy.
Gaurav tells that it is not advisable to invest in a project that just got launched with a team with no backing or not known. Rather, it is always better to opt for projects that have been there for a good 1-2 years at least.
“Also, a very significant aspect is that those projects that were present during the difficult period for the crypto industry in 2018-2019 hold more credibility. After all, the ones that sailed through difficult times and are still going on are less likely to turn out to be scams. Scammers mostly come during peak times,” Gaurav elaborates.
Understanding the value proposition
Understanding the project value proposition is equally important. Gaurav further advises investors to check the history and purpose that a project holds.
“Figure out what gap is the project trying to fill. Apart from the purpose, one also needs to take into account the uniqueness of the project,” he suggests.
Doing proper homework
An investor should do proper homework, analysis and then pick the assets to invest in.
“Those who just invest on the basis of hearsay, will without a doubt not understand the market behavior and end up losing, and then criticize the project,” he warns.
Knowing the risks
According to Siddharth Menon, co-founder and COO of WazirX, it’s always good to assess risk before getting into any project.
“For example, decentralised finance (DeFi) may see tremendous growth from here but it doesn’t mean that all the DeFi projects are good. One needs to understand the tech behind it and check how robust it is,” he opines.
Going for long-term
Menon suggests investors buy the dip and always have a long-term view.
For example, Menon said investors who invested in Bitcoin at $19,000 – right at the top of the 2017 bull run – saw their investments going down 75-80 percent. However, the believers held on to the investments and have gained 300 percent plus on their investments after three years.