Five steps to researching a crypto before taking the plunge and deciding to invest

the latest tech news, global tech news daily, tech news today, startups, usa tech, asia tech, china tech, eu tech, global tech, in-depth electronics reviews, 24h tech news, 24h tech news, top mobile apps, tech news daily, gaming hardware, big tech news, useful technology tips, expert interviews, reporting on the business of technology, venture capital funding, programing language

The crypto market is volatile and more cryptoassets often emerge with every week that passes.

This is why research is so important when picking a cryptoasset to invest in, since it can increase your case for investing to make potential gains while reducing your risks of potential losses.

the latest tech news, global tech news daily, tech news today, startups, usa tech, asia tech, china tech, eu tech, global tech, in-depth electronics reviews, 24h tech news, 24h tech news, top mobile apps, tech news daily, gaming hardware, big tech news, useful technology tips, expert interviews, reporting on the business of technology, venture capital funding, programing language

Unlike with investing in stock market-listed company shares, however, there are no regulated company reports outlining profits, losses, revenues and cash flow to interrogate.

Crypto investors must therefore tread carefully, do their research into other aspects, and be wary of what can move the market. Here are five things that can help with that.

Global Tech News Daily

Research is important when picking a cryptoasset to invest in

Research is important when picking a cryptoasset to invest in

Global Tech News Daily

1. Understand tokenomics and supply

Tokenomics involves understanding the supply and demand characteristics of a crypto asset.

One of the reasons why bitcoin has become so popular is its limited supply. Capped at a maximum total of 21 million bitcoins, this limit means that with enough demand in place it should in theory rise in price over time. It is therefore referred to as deflationary.

The question should be applied when looking at other cryptoassets. Does a new crypto have a capped supply, or is its supply potentially infinite?

Certain major cryptoassets, such as ethereum, solana, polkadot and dogecoin, have uncapped supplies. If demand lags behind supply, their prices would in theory decline in the long run. They are therefore considered inflationary.

Note that several factors complicate this picture. For one, many cryptos are designed to have a controlled rate of inflation, with solana’s and polkadot’s fixed at 8% and 10%, respectively.

Similarly, some cryptos – such as ethereum – burn a portion of the fees paid to the ‘miners’ responsible for verifying their transactions, this removes ethereum from circulation. So even though such cryptos are inflationary in theory, they can be non-inflationary or even deflationary in practice.

2. Look at what the crypto does and who is using it?

It is obviously important to look at what a crypto does and what platforms or applications it is related to. Are these useful, trustworthy and do they have potential to succeed?

Often a crypto that does meet any of those three criteria can soar in value, but backing these is speculation not investment, and they can be highly volatile and crash as swiftly as they rise.

It’s also vitally important to check whether a crypto or the blockchain platform it belongs to is actually being used. There are various ways of doing this.

With cryptoassets such as bitcoin, litecoin , dogecoin and bitcoin cash , one good indicator of use is the number of active addresses.

With cryptoassets such as bitcoin, litecoin , dogecoin and bitcoin cash , one good indicator of use is the number of active addresses.

User numbers

With cryptoassets such as bitcoin, litecoin, dogecoin and bitcoin cash, one good indicator of use is the number of active addresses.

You can look this up at a site such as BitInfoCharts.com. On 13 January 2022, it showed Bitcoin had around 779,685 active addresses within the last 24 hours, by contrast, dogecoin accounted for 66,430.

Aside from wallet addresses, certain cryptoassets are also associated with a platform – be it a blockchain-based video game or a crypto-exchange – that has actual users. It’s highly recommended to check data on the number of users, where available, to see how a platform is used and if it is growing.

One good example of this is provided by Axie Infinity. This blockchain-based game has been updating a Google spreadsheet with its user data since April 2021.

This spreadsheet has revealed consistent growth in daily active users since it was first published, growth which was eventually followed by increases in the price of the Axie Infinity crypto.

Total value locked in

For cryptoassets with a general-purpose blockchain such as ethereum and solana, their ‘total value locked in’ provides a key insight into their health.

This is a number that measures the value of the assets stored by apps running on a particular blockchain.

3. Learn more on cryptoassets from trusted sources

It’s not difficult to find people with an opinion on crypto, and within the crypto investing and trading world there are a multitude of competing voices.

But who is the person whose thoughts you are reading, listening to or watching, and can you trust them? That is a vital question to ask.

It’s important to do your research via reputable sources, and give more weight to the views of respected commentators than the thoughts of an anonymous chat forum poster.

Resources such as eToro’s Academy and its News and Analysis section can help, along with other reputable places to research and read about crypto.

It’s important to do your research via reputable sources, and give more weight to the views of respected commentators than the thoughts of an anonymous chat forum poster.

It’s important to do your research via reputable sources, and give more weight to the views of respected commentators than the thoughts of an anonymous chat forum poster.

4. Look at technical indicators such as RSI and moving averages

Relying too much on charts can be risky, if only because past patterns are no guarantee of future patterns.

However, there are at least some technical indicators that suggest a higher probability that a cryptoasset’s price may move in a certain direction.

One of these is the relative strength index (RSI), which is calculated using average price gains and losses across a certain period of time. It’s given as a number between 0 and 100, with 0 indicating that an asset is oversold and 100 indicating that it’s overbought.

Basically, the RSI suggests a good time to buy or sell a crypto: if the number is above 70, it may not be a good time to buy. Conversely, if it’s under 30, it may be a good time to buy, since the asset in question is going at a discount and may be about to rise again.

Like the RSI, moving averages indicate momentum. These are calculated over varying periods of time.

The most watched moving average is the 200 day line, if the price of an asset is above this the market is seen as bullish or keen on it and if the price is below that line, it is considered bearish or not keen on investing. Breaches of this line are closely watched.

It can also be useful to compare a crypto’s short-term moving average with its long-term average.

Some investors regard it as significant when an asset’s 50-day average rises above its 200-day average. This is known as a ‘golden cross’, and may indicate that a new rally is beginning.

You can look at crypto prices and their moving average in eToro’s charts.

If a crypto is traded on only one or two lesser-known exchanges, it may not be a safe investment.

If a crypto is traded on only one or two lesser-known exchanges, it may not be a safe investment.

5. Where can a cryptoasset be bought and traded?

It’s important to find out where a cryptoasset can be traded before you buy it.

This is not only for obvious practical reasons, but because the answer to this question provides an important insight into the depth and quality of an asset’s market.

If a crypto is traded on only one or two lesser-known exchanges, it may not be a safe investment. With such a small market and little liquidity, it potentially becomes more vulnerable to price manipulation by a few bigger traders.

Meanwhile, if a crypto can only be bought through unusual places it could be a scam.

It’s therefore better to confirm that a cryptoasset is listed on a wide variety of well-known regulated exchanges or platforms. This offers a greater chance that its market is liquid and not susceptible to manipulation of any kind.

‘eToro looks at a number of criteria when deciding to list a cryptoassets,’ says Simon Peters, eToro Crypto Analyst. ‘Aside from considering customer interest, we do our due diligence. 

‘Our team considers market capitalization, trading volume, business case behind the coin, its management and community involvement etc. 

‘We also consider the liquidity of the asset, to ensure investors can buy or sell the asset without disruption. Finally, we have a framework that helps us to constantly review and evaluate the cryptoassets we offer in light of the fact that the regulatory landscape around crypto activities is evolving rapidly.’ 

Explore crypto investing with eToro, a secure place to buy and sell cryptoassets.

Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.

This communication is for information and education purposes only and should not be taken as investment advice, a personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without taking into account any particular recipient’s investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past or future performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication.

News Related

OTHER NEWS

Max Verstappen's brutal comment to Lewis Hamilton over world title loss

Max Verstappen has brutally shown no mercy towards Lewis Hamilton after controversially pipping him to last season’s Formula One title. The 2021 world champion shrugged off talk of feeling sympathy ... Read more »

South Africa: Springboks’ home Test schedule for 2022 confirmed

© PA Images Springboks-huddle-at-training-2021-PA The Springboks are scheduled to face Wales in three Test matches in the Incoming series in July, before hosting the All Blacks and Argentina in the ... Read more »

Quiz: Did Stoke City win, lose or draw in each of these 25 games this season?

© Provided by Football League World Championship – Stoke City v Fulham Stoke City will be eager to get themselves back towards the play-off places in the coming weeks and ... Read more »

Roy Keane to Sunderland: What does he offer? What EFL experience does he have? Can he get them promoted?

Sunderland’s managerial search has come down to two candidates, Football League World exclusively learnt yesterday.  The report states that Roy Keane and Grant McCann are the two options that the ... Read more »

DNCE announce their return and departure of Cole Whittle

© Bang Showbiz Joe Jonas’ DNCE confirm new music as trio Joe Jonas’ DNCE are reuniting without bassist Cole Whittle. The Jonas Brothers star has confirmed the ‘Cake By The ... Read more »

Eight things you should know about beloved North East rock star Sam Fender

North Shields rock star Sam Fender is up for a number of coveted Brit Awards at tonight’s ceremony, after a fantastic couple of years saw him shoot into stardom. Sam ... Read more »

Gerard Butler boards new heist thriller Just Watch Me

© Bang Showbiz Gerard Butler to star in heist thriller Gerard Butler is to play a thief in the new heist thriller ‘Just Watch Me’. The 52-year-old actor has boarded ... Read more »

Driver injured by shards of glass after brick thrown at moving train in Greater Manchester

The driver - who has not been named - was taken to hospital for treatment and is now recovering at home. Read more »

Sam Fender's former school teacher wishes him good luck ahead of Brit Awards

Sam Fender’s former head of sixth form has shared a kind message ahead of tonight’s Brit Awards ceremony where the North Shields star is up for three awards. The frontman ... Read more »

BP swings to highest annual profit in eight years

Oil giant BP has posted its highest annual profit in eight years amid mounting pressure on the sector as the cost-of-living crisis deepens. The group revealed it swung to a ... Read more »

2023 Range Rover Sport Spied Up Close With Thinner Camouflage

© Motor1.com Copyright 2023 Range Rover Sport spy photo It’s already looking more athletic than its bigger brother. It was two years ago when our spies first stumbled upon the ... Read more »

We simulated Burnley vs Manchester United to get a score prediction

Manchester United will be looking to put their FA Cup woes behind them and bounce back with a win on Tuesday, as they face Burnley in the Premier League. Anthony ... Read more »

Afcon 2021: Salah’s ego questioned by Murphy after Egypt final defeat to Senegal

Former England and Liverpool player Danny Murphy has questioned the decision to have Mohamed Salah wait for the fifth penalty against Senegal in the Africa Cup of Nations final on ... Read more »

Derby County v Hull City: Latest team news, Is there a live stream? What time is kick-off?

Derby County host Hull City at Pride Park this evening as both sides look to get back to winning ways in the Championship.  Shota Arveladze was handed his first defeat ... Read more »

Bruce Mouat and Jennifer Dodds suffer heavy defeat in bronze medal match

© PA Wire Great Britain’s Jennifer Dodds and Bruce Mouat during their 9-3 bronze medal match defeat against Sweden (Andrew Milligan/PA Images) – PA Wire Great Britain’s hopes of winning ... Read more »

People are absolutely disgusted as disturbing footage of Kurt Zouma kicking a cat goes viral

Social media users have been left absolutely disgusted after disturbing footage of Kurt Zouma kicking his pet cat. The West Ham and France defender has issued an apology after footage ... Read more »

Eileen Gu ‘breaking boundaries’ but contradictions heighten tensions after gold

Eileen Gu is already the face of Vogue, Victoria’s Secret, Louis Vuitton and Tiffany but now she’s the face of these Olympics too – with medal bling to rival those ... Read more »

Man City legend Sergio Aguero opens up on fear after heart scare and jokes he is 'Ironman'

Sergio Aguero has recalled the fear he felt after being rushed to hospital when he appeared short of breath while playing for Barcelona. The Manchester City legend had only just ... Read more »

Royal Navy's £3bn nuclear headache to last DECADES - two dozen ships face scrapheap

Storage and maintenance costs of vessels withdrawn from service amount to about £30 million per year, news website Navy Lookout reports in its latest technical briefing. Continued delays are expected ... Read more »

‘Pay up!' Man, 85, furious as his state pension is ‘frozen' at £70 per week

State pension payments usually increase each year by the highest of 2.5 percent, average earnings or inflation under the triple lock. Even though this policy has been temporarily suspended, most ... Read more »

Northumberland to host Dark Skies Festival 2022 - and it starts this week!

Northumberland is set to celebrate officially having ‘the most pristine dark skies in England’ with the return of the Northumberland Dark Skies Festival. Following the success of last year’s virtual ... Read more »

Coworth Park review: relaxing, tranquil and dreamlike

© Provided by The Week UK An exterior view of Coworth Park from the croquet lawn Doing as little as possible is the order of the day at this swanky ... Read more »

Lanzarote pleads with Spain to drop entry rules for Britons' holidays - ‘let them come'

The Tourism Federation of Lanzarote (FTL) has called for Spain to relax the travel rules for British tourists. It said that vaccine requirements are ruining the winter season for Britons. ... Read more »

Picture books for children – reviews

Young children’s counting books can (whisper it) be a bit dull. They’re brilliant, of course, at helping under-fives learn their numbers. But turning page after page of, say, farmyard animals ... Read more »

Roundup of Olympic gold medals from Tuesday, Feb. 8

© Provided by Associated Press – Sports Gold medalist Austria’s Benjamin Karl celebrates during the venue ceremony for the men’s parallel giant slalom at the 2022 Winter Olympics, Tuesday, Feb. ... Read more »

NHS to prescribe ‘game-changer’ weight loss drug to tackle obesity crisis

© PA Wire NHS weight loss programme for obese patients The NHS is to prescribe a new weight loss jab in order to tackle the obesity crisis in England. The ... Read more »

Eddie Howe breaks Newcastle's silence on failed transfer for Manchester United's Jesse Lingard

© Clive Brunskill/Getty Images. Opportunities have been hard to come by for Jesse Lingard at Manchester United this season. Newcastle United head coach Eddie Howe has admitted to being a ... Read more »

Update emerges after Newcastle United’s January interest in Bournemouth player

Newcastle United remain interested in Bournemouth’s Lloyd Kelly, with the Premier League outfit set to offer a deal for the 23-year-old regardless of what level of football they will be ... Read more »

Former Rangers star gives club backing over transfer interest in 'very promising player'

Former Rangers star Ronald de Boer has given the club his backing over the possible signing of Danilho Doekhi. © Danilho Doekhi has been strongly linked with Rangers. (Photo by ... Read more »

Newcastle United owners can learn Liverpool lesson as Man Utd show what not to do

Newcastle will have to replicate last month’s lavish spending in future windows if they are to achieve their dream of mixing it with the Premier League big boys. Five new ... Read more »

SMALL CAP SHARE IDEAS: Gartner Cycle points to upswing for microbiome pioneer OptiBiotix Health

Take a good look at the chart below. It’s called the Gartner Hype Cycle. It’s so named because it represents the distilled learning of the research group Gartner on the ... Read more »

Paul Heckingbottom explains the role Sheffield United supporters can play in the club’s play-off push

Sheffield United have carried on their resurgence up the table since Slavisa Jokanovic’s departure and they look more likely than ever to make an assault on the play-off places. The ... Read more »

Kurt Zouma apologies after former Everton loanee filmed kicking cat

© Visionhaus/Getty Images Kurt Zouma of West Ham United during the Premier League match between Wolverhampton Wanderers and West Ham United at Molineux Former Everton defender Kurt Zouma will reportedly ... Read more »

Grant McCann to Sunderland: What does he offer? What EFL experience does he have? Can he get them promoted?

A new Sunderland head coach is expected to be appointed this week and Football League World understands that the search for Lee Johnson’s replacement has been narrowed down to just ... Read more »

32-y/o starts: The predicted Cardiff City XI to face Peterborough on Wednesday night

Cardiff City will be looking to bounce back from their FA Cup defeat to Liverpool by picking up a positive result in their upcoming Sky Bet Championship game with Peterborough ... Read more »

How to watch every Premier League match on TV this week and kick-off times

© Michael Regan/Getty Images Nine Premier League midweek fixtures will be shown live on BT Sport across Tuesday, Wednesday and Thursday. The Premier League returns this midweek with most teams ... Read more »

Noel Whelan predicts Lewis will ‘not be part of the squad’ next season

© Stu Forster/Getty Images Sport Jamal Lewis – 4 Jamal Lewis was controversially left out of Newcastle United’s 25-man Premier League squad for Matt Targett and reports suggested he would ... Read more »

Pundits agree over Manchester United vs Burnley result prediction

© Clive Brunskill/Getty Images Scott McTominay scores against Burnley earlier this season Manchester United return to action in the Premier League this evening as they travel to Burnley. Ralf Rangnick’s ... Read more »

Steven Gerrard to repeat Rangers trick at Aston Villa amid stunning Cameron Archer form

Former Premier League goalkeeper Paul Robinson has backed Aston Villa loanee Cameron Archer to force his way into Steven Gerrard’s first-team plans next season. Archer is currently playing his football ... Read more »

Newcastle United vs Everton: Lee Ryder's Premier League preview

Newcastle United winger Allan Saint-Maximin got it right this week when he said that draws are no longer much use to the much-maligned Magpies. Every point in the Premier League ... Read more »