Cryptocurrencies attract the attention of private and institutional investors due to the fact that this is one of the most affordable ways of investment. Another reason for the huge interest in this type of asset was a terrific Bitcoin growth at the end of 2020 the beginning of 2021. The first cryptocurrency’s price almost reached $70,000, which was seven times above Bitcoin’s price for the past several years.
Before you buy your first token or create your own investment portfolio, it is crucial to understand what lies behind the price changes. The understanding of fundamental processes that stimulate the growth or depreciation of a certain cryptocurrency allows you to make the right decisions in the future. All those drivers can be divided into internal and external.
The change of the demand/supply ratio is the main reason for the cryptocurrency price to change. If the investors' or traders’ interest is higher, the price goes up. Otherwise, you will see the quotes go down when the volume of short positions is greater than the volume of long ones.
The demand and supply dynamics depends on various factors. The interest in a particular project may be caused by its unique technology or a significant breakthrough in the development process. This means you need to have detailed research of the project and its documentation before investing in a particular token.
Important news releases can also stimulate cryptocurrency’s price growth. You can see such a phenomenon when you buy classic stocks on traditional markets. Positive updates make any project more attractive to investors.
All those factors impact market sentiment. The more successive the project is, the more interest it attracts.
Those are the cryptocurrency industry’s regulations in various countries, the global economic landscape, and the volume of cryptocurrency followers as a whole.
Global economics have a direct correlation with the cryptocurrency market. Those unique quantitive easing measures accompanied by the rates cut that we have seen in 2020, pushed investors to buy cryptocurrencies. The main reason for that is that Bitcoin and altcoins are resistant to inflation.
Unlike fiat currencies that are regulated by the central banks, cryptocurrencies are based on a unique inflation model. Their maximum emission is limited by the special algorithms. That is why tokens are frequently compared to traditional gold and other precious metals, which reserves are also limited.
Cryptocurrency adoption by various countries is another positive driver for the tokens to grow.
There are several important criteria that one can use to conclude whether a particular token is promising or not:
- Technology analysis.
- Project team.
- Roadmap deadlines.
- The date of the project's inception.
- Tokens liquidity.
- Community sentiment.
- Technical analysis.
Before adding a particular token to your portfolio, it is crucial to examine the White Paper document and all other information about the project goals.
The idea of this step is to understand whether the project has a future or not. If it is about a payment method, it should include some cutting-edge solutions that will simplify transactions and make them cheaper and faster.
This stage will help you to put aside those “token for token” projects. Although, looking at Dogecoin skyrocketing, sometimes, those projects may give you breathtaking results.
If there are some famous personalities in the team, the project will attract the community’s interest in most cases. The example of the TON Blockchain is more than illustrative. Even though the project was closed as it lost its fight against the SEC, TON managed to collect huge investments.
Experts agree that if the project were launched, it would compete with Ethereum. Famous and rich Russian, US, and European investors were among those who funded this Blockchain.
Roadmap research is a part of fundamental analysis. Before buying a particular token, it is recommended to check the milestones of the project that are already passed. You can also look at the steps that the team still has to do to launch the product.
Reliable projects attempt to meet all deadlines that are included in the roadmap. If not, you should be cautious buying a token. The fall of many projects started at the moment they were unable to meet the deadlines.
The date of the project’s inception
It is better to choose projects that exist for a long time already for conservative investments. Those are Bitcoin or Ethereum, for example. However, picking only those tokens may not be beneficial when it comes to your portfolio yield’s potential. You can add the young project as well if other recommendations are met.
Liquidity is the ease with which the assets can be converted into real money. The safest way to create a portfolio is to add liquid tokens only. However, this does not mean you shouldn’t add cheap cryptocurrencies with low liquidity. Those tokens may become more expensive and liquid in the future. When buying those low liquidity tokens, you risk having problems when trying to sell them quickly.
This is a very important criterion that reflects the demand potential. You can make your own research by looking through Telegram chats or other social media. It is crucial to focus on the questions the token holders ask and the way the project communicates with the community.
This is the way to forecast price fluctuations using charts and various math algorithms. The technical analysis allows traders to find market trends and pivot points. You need to learn the main tools including graphic patterns before you start using them.
As you can see, there is no way to simply buy a token and get a breathtaking yield. You need to analyze each project separately before adding a cryptocurrency to your portfolio. This takes much time and effort. The beginner may spend months making a decision. Project tokens may rise significantly in this period and the benefits from buying a cryptocurrency will become very low.
There is an easier and reliable way to create your portfolio. By registering on Broex exchange, you can rely on the cryptocurrency experts to give you hand. Apart from the opportunity to buy and sell tokens here, you can get some important pieces of advice on the tokens to be added to the portfolio.
Broex is a mixture of a traditional cryptocurrency exchange and an analytics platform. The website offers you an opportunity to store the tokens safely using the built-in cold storage facilities. To fund your account, you can use any VISA/MasterCard cards.
Fast and cheap transactions are another advantage of this platform. Cryptocurrency price is fixed at the moment of transaction to avoid price slippages.