WHICH CRYPTO IS THE BEST?

WHICH CRYPTO IS THE BEST?







WHICH CRYPTO IS THE BEST?

The cryptocurrency market is booming, and to start exploring options beyond bitcoin and ether, you need to learn some basic cryptocurrency analysis principles. Checking the fundamentals and metrics of these assets is one of the ways to increase the chances of success and avoid falling for scams.

“The maxim in the crypto world is ‘Do Your Own Research’. All the information is at your fingertips, but you won’t find it all compiled in one place. You have to go deep,” says Fabricio Tota, director of Bitcoin market exchange

fundamentals OF CRYPTO PROJECTS

Project fundamentals
Cryptocurrencies, in general, are supported by projects that have goals for the use of blockchain technology. Solana (SOL), for example, was created to facilitate the creation of decentralized applications, while Decentraland (MANA) aims to build a shared virtual world.

According to analysts consulted by Forbes, checking out these projects and assessing whether they make sense is the first step in analyzing a cryptocurrency.

“Many people have the impression that the crypto market is all about coins, but, in fact, it has numerous different business models, which can and should be analyzed as a company or a business,” says Orlando Telles, partner and director of research at the analysis house Mercurius Crypto.

These assets can present different solutions for the same problem, which creates an environment of competition. To check which are the competitors of a particular cryptocurrency, such as bitcoin, a Google search with the terms “bitcoin vs.” will show you some options.

There are also cryptocurrencies that are not supported by projects. This is the case with meme-based assets such as dogecoin, which are generally more volatile and less promising than other assets.

Dogecoin, however, is a special case: in the last year, it has risen by more than 300%, thanks to the support of billionaire Elon Musk.

To learn more about a cryptocurrency proposal, it is recommended to review its whitepaper, a public document that details the project and its goals. Telles says that the average investor can interpret the whitepaper, although there are some more technical versions.

But the analyst offers a tip: “I suggest you get content aimed at beginners to understand the logic and functioning of the framework, and only then evolve into the whitepaper. There are numerous free content from analysts in English and others lenguages on YouTube that facilitate understanding.”

Even with the correct interpretation of the whitepaper, caution must be exercised: in fraudulent projects, often the whitepaper is just a copy of the document of other cryptocurrencies. Tota points out, however, that if the cryptocurrency is being offered on an exchange, this is already an indication that it has some foundation.

governance





Secondly, it is important to analyze who the people behind the cryptocurrency are, and consider the following aspects: have any of them worked on a successful project in the past? Are they big names in the cryptocurrency ecosystem? What are your qualifications?

Cryptocurrencies often provide basic information about their founders on their websites, for example. That’s what Polkadot (DOT) does, which features the name of its three founders, along with a brief summary of their experiences and qualifications.

The absence of this information is a reason for caution for the investor.

Likewise, it is worth noting who are the project’s board members and checking if that cryptocurrency has any partnership with a relevant company.

In this context, Tota reinforces the necessary caution not to base investments on fake news: “The most common mistake is to believe in some kind of rumor, such as ‘They said that this will be the technology that Facebook will adopt’, or ‘Google will use that currency’. It’s very common to hear things like that.”

At this time, it is important to seek reliable sources, such as media outlets and websites widely known for observing the principles of professional journalism.

Metrics

Finally, it is also necessary to keep an eye on the quantitative metrics of the cryptocurrency. For Telles, the concept of “tokenomics” is one of the main ones to be analyzed. According to the director, this metric allows investors to assess whether a particular asset is being valued at the same rate as it creates value. It is this balance that allows the asset to be financially viable.

“Many investors end up confusing the size of the project with the token’s ability to capture value. For example, we are going to have ecosystems growing, but the token at that moment is not capturing value. It depends a lot on the economic structure of the asset”, explains Telles.

Market capitalization should not be ignored either. This metric is calculated by multiplying the asset’s price by its volume, and indicates whether there are a large number of people trading the currency in the market. If the index is low, it could be a warning sign.

In general, a large number of transactions indicates that the asset has high liquidity, which is a positive thing as it reduces the spread – that is, the difference in price between buying and selling – of the asset, as well as its volatility.

Even with good fundamentals and indicators, however, cryptocurrencies may not prove successful in the long term. “Deliveries may be delayed, the project may be frustrated, a better competitor may arrive… It’s the same thing that happens in companies”, says Tota.

Therefore, it is worth the utmost caution: when investing in cryptocurrencies, only invest the amount you are willing to lose. And if a proposal sounds too good to be true, it probably is.

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