With more investors entering the cryptocurrency and Bitcoin marketplace, it’s never been more important to have a clearly defined game plan so you don’t lose money. The good news is that it’s simpler than ever to invest in digital assets these days, but there are still some key factors you need to consider before you buy cryptocurrencies for trading.
Market Capitalization
At the present time, there are over 5000 different cryptocurrencies out there to choose from. However, only the biggest tend to be covered by the media, and it is these tokens that are most familiar both to seasoned and new investors.
Market capitalization is a term used to reflect on how big a company is. This metric is worked out by taking the price of the asset then multiplying it by how many shares are available. This metric also gives an insight into how risky investment in this company may be. Therefore, it’s vital to check the market cap of any digital asset before buying.
Tokens that have a large supply in circulation paired with a high market cap are, in theory, less vulnerable to wild volatility and manipulation. Meanwhile, coins with a small market cap are more likely to see wild price variations on negative or positive news releases.
Trading Volume
Before purchasing any cryptocurrency, you need to check its trading volume. This probably won’t be a problem for the biggest and best-known tokens, but if you’re interested in one of the more obscure altcoins, you need to investigate the number of tokens that are being purchased and sold each day.
When there is a high trading volume, it’s easier to purchase and sell that digital asset. Meanwhile, if the trading volume is low, this suggests low liquidity which could cause traders to find it difficult to purchase the asset. It also suggests the project may be ailing or even dead.
Store Your Cryptocurrency Safely
Once you’ve invested in cryptocurrencies, you need to determine where and how to store it securely. Although it’s possible to keep your cryptocurrency or Bitcoin on your exchange, the counterparty risks mean that this is a less secure method that should, if possible, be avoided, especially if you’re purchasing large amounts.
Hardware wallets are a popular option that allow for digital assets to be stored offline and only accessed by you. There are also software wallets that allow you to store your private keys with an application that is accessible via smartphones, iPads, and laptops. Both are a better choice than leaving cryptocurrencies on the exchange.
Although it may seem risky or difficult to invest in cryptocurrencies, it needn’t be either of these things. You simply need to draw up an effective plan before you take action and do plenty of research before you make investments in any digital asset.
Cryptocurrencies and Bitcoin represent excellent investment opportunities these days, and as long as you keep these things in mind, you can enjoy a safe and profitable trading experience, taking advantage of the latest digital assets to maximize your profits.