How to Choose a Coin to Invest in the Long Term

The easiest, but far from the most effective, way to create a financial airbag or save money for a big purchase is to save some of your income. Investing is a more progressive and profitable approach. Cryptocurrencies have already become quite a popular investment tool. However, due to their specificity, the choice of an asset and the choice of an investment strategy should be approached responsibly.

How to choose the best coin for investment?

The first cryptocurrency recently celebrated another birthday. Bitcoin has been around for 14 years and still plays the first fiddle in the market. It leads in all market indicators and is traded on almost any crypto exchange.

But a lot has changed in 14 years. As of the beginning of January 2023, there are 22,222 cryptocurrencies in total and the number is growing every day. The total market capitalization slightly exceeds 820 billion US dollars, there are 534 cryptocurrency exchanges on the Internet. The choice is gigantic and therefore not easy.

First of all, you should proceed from your own goals, financial capabilities, and risk tolerance. The same coin can be a great tool for aggressive trading, but completely unsuitable for long-term investment, and vice versa.

When it comes to medium-term and long-term investing, you should pay attention to the following characteristics:

Market Capitalization

The TOP 10 by market capitalization now include Bitcoin, Ethereum, Binance coin, Ripple, Cardano, Polygon, DOGE, and three-dollar stablecoins: USDT, BUSD, and USDC. Approximately 57% of the market capitalization falls on the share of Bitcoin and Ethereum. These are the “blue chips” of the cryptocurrency market and part of the money can be invested in one or both of these coins.

Coins from the TOP-10 are quite popular and widely represented on various crypto exchanges. Indirectly, the popularity of coins from the top ten can be considered the availability of the BNBBTC quotes chart on several platforms.

Also, top coins are considered the lowest-risk ones. However, one cannot expect a rapid growth of thousands of percent from them. An experienced crypto prime broker will recommend combining coins from the TOP-10 with more exotic assets. To the greatest extent, this applies to stablecoins, the value of which is pegged to the USD.

Total and Current Coin Supply

Each coin can be classified as a deflationary or inflationary asset. It is common knowledge that the total supply of BTC is limited to 21 million coins and a total of 19,254,475 BTC has been mined.

If the demand for a coin is growing, and the supply is decreasing, that is, the very nature of the asset contains the prerequisites for a price increase. Thus, when deciding which cryptocurrency to buy for investment, it is worth knowing what the total supply will be and how much of it is already in circulation.

White Paper

This is the name of the main technical document of any cryptocurrency (with the exception of the phenomenal meme-coins DOGЕ and SHIB, which were originally created as a joke). Such a document describes all the characteristics of the coin: the purpose of the project, the tasks that it must solve, technology, tokenomics, etc.

The first criterion for a serious project is clearly defined goals and stages of its achievement. The second is its realism. If everything is OK with the white paper, the coin can be considered as a candidate for a place in the investment portfolio.

As the project develops, it will be possible to assess how accurately the vision mentioned in the white paper is being realized. If everything goes according to plan, the value of the coin will rise. And in this case, you can think about increasing the amount of investment in this coin.

Use Cases

Bitcoin was created as an alternative means of payment but has become more of an investment tool than a currency. Actually, this is the main way to use it.

Ethereum has become the basis for the development and deployment of decentralized applications. At the moment, the possibilities of using the Ethereum blockchain are only expanding. Based on the platform, new cryptocurrency projects, decentralized crypto exchanges, and much more are being created.

This contributed to the growth of the price of ETH and gave grounds for optimism regarding its prospects. The more use cases, the wider the recognition of the coin will be and the more significantly it can rise in price.

And remember that investing is first and foremost a strategy. Over time, having accumulated more knowledge and experience, you will be able to manage capital more confidently and effectively. However, never, under any circumstances, invest more in cryptocurrency than you are willing to lose.

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