How to evaluate the income in investment in cryptocurrency
The cryptocurrency world has exploded in the last decade, with new coins and tokens that are thrown every day. While many investors have entered the market with high hope and expectations of income, reality is usually much more complex. With this uncertainty and volatility associated with cryptocurrency investment, it can be a challenge to separate the sign of noise and make informed investment decisions.
In this article, we will explore how to evaluate investment income in cryptocurrency and provide a complete guide to help you browse the market.
Understand the investment in cryptocurrency
Before diving into evaluation techniques, we first understand what is the investment in cryptocurrency. Cryptocurrencies are digital or virtual currencies that use encryption for decentralized safety and control. They operate independently of banks and central governments, allowing users to send them, receive them and exchange them directly without the need for intermediaries.
It can be invested in cryptocurrencies through multiple platforms, including exchanges, brokerage accounts, and individual wallet applications. Each platform has its own set of rules, fees and requirements to buy, sell and maintain cryptocurrencies.
Investment evaluation: a step by step guide
To evaluate the performance of cryptocurrency investment, follow these steps:
- Set your investment goals : Before investing in cryptocurrencies, it is essential to define your investment objectives. Are you looking for short -term gains or long growth? Do you want to diversify your portfolio or focus on a specific asset class?
- Investigate cryptocurrency : Investigate the cryptocurrency in which you are interested in investing. Look for yours:
* Blockchain technology : Understand how the underlying infrastructure works and infrastructure.
* Development and consultants : Make sure the development team is experienced, credible and transparent about their goals.
* Market capitalization : Compare market capitalization of different cryptocurrencies to understand the market scale.
- Evaluate technical indicators : Technical indicators can provide valuable information on the price standards of a cryptocurrency, trends and volatility. Some popular technical indicators include:
* Mobile averages : Average prices for a specific period (for example, 50 days, 200 days).
* Relative Strength Index (RSI) : Measures the speed and change of price movements.
* Bollinger Bands
: Understand two standard deviations and one moving average.
- Analyze Market Feeling
: Market feeling can indicate investors’ confidence in the value of a cryptocurrency. To analyze:
* Trend lines : plot lines showing signs of potential purchase or sale.
* Support and resistance levels : Identify areas where prices tend to jump or break.
- Evaluate the volume of liquidity and negotiation : Liquidity measures the ease of buying and selling a currency, while the negotiation volume indicates market activity. To search for:
* High liquidity : A low standard deviation and high trading volumes may indicate more stability.
* Commercial volume growth : Increased commercial volume may indicate a growing interest in cryptocurrency.
- Evaluate risk tolerance : Investment in cryptocurrency implies a significant risk. Evaluate your risk tolerance evaluating:
* Volatility : Understand how much you are willing to lose or win each trade.
* Factors of fear and greed : Take into account emotional biases that can increase investment decisions.
- Consider alternative metrics : In addition to financial metrics, consider alternative methods to evaluate cryptocurrency income, such as:
* Network Effects : Evaluate the value of a cryptocurrency, depending on network size and user growth.