7 simple tips to better understand cryptocurrency market data
2018 was a wild ride for cryptocurrencies. Despite the many ups and downs experienced by Bitcoin and other major cryptocurrency vendors, the market has proven that it is going to stick around for the long haul.
If you’re still new to the crypto investing scene, however, the sheer number of investing options — and new terminology — can feel overwhelming.
Here are some tips to get you started on the right track:
1) Know the relation between market cap and circulating supply
New cryptocurrency investors may be intimidated by the new vocabulary they need to learn and how these different terms affect pricing. For example, the “market cap” for a particular coin is used to determine the total value of coins on the market. This number is determined by multiplying the coin’s circulating supply by its current price.
The use of the circulating supply, rather than the total supply, is an important distinction. For a variety of reasons, some coins are not available on the public market. Because they aren’t available for trading, they are not counted toward price considerations or the market cap.
2) Keep up with current market conditions
You can read articles debating the pros and cons of various cryptocurrencies, but current market data will always be the most reliable source for identifying trends and making smarter trading decisions.
Fortunately, there are several websites dedicated to providing up-to-the-minute updates regarding changes in price, supply and market cap. Coincap, CoinMarketCap, and CryptoCompare are just a few examples of resources that help investors stay up to date on current prices. Data that is updated in real-time is paired with charts tracking changes over 24-hour and seven-day periods to give investors a better idea of current trends.
3) Follow the leaders
Even when you have real-time data available, making a trading decision based on a “top 100 cryptocurrencies” list can be intimidating.
However, when this data is paired with guidance from top investors, you can have greater confidence in your decisions and even learn a few extra pointers along the way.
Sites like eToro utilize what is known as a “social trading” program that allows top investors to share their knowledge and trading practices.
4) Diversification is vital for success
As with traditional investment opportunities, diversification is essential if you wish to come out a financial winner in cryptocurrencies. With a more diversified portfolio, you reduce your overall risk, especially if you invest in coins and tokens that service different sectors.
This also means you should continue to invest in non-crypto spheres. These practices maximize your potential return while alleviating the risk should a particular coin or stock go under.
5) Understand which factors influence pricing
What causes cryptocurrency prices to rise and fall? Though supply and demand certainly play a role, crypto investors should carefully consider the perceived utility of a cryptocurrency. If a coin is perceived as having several practical applications, it will be more highly sought-after, and therefore, increase in price.
As MyCryptopedia explains, mining difficulty is another major factor that affects pricing: “A higher mining difficulty means that it is harder to mine an additional unit of a coin. This can have an impact on a coin’s perceived value, and subsequently, its price, as increasing a coin’s supply will require more computing power to be used in the mining process.”
Savvy investors should also pay attention to news headlines regarding different coins and tokens. Positive or negative articles will often have a direct correlation on future pricing trends.
6) Research individual coins and tokens
Cryptocurrencies have frequently been called out as nothing more than a scam by skeptical individuals.
2018 was a wild ride for cryptocurrencies. Despite the many ups and downs experienced by Bitcoin and other major cryptocurrency vendors, the market has proven that it is going to stick around for the long haul.
If you’re still new to the crypto investing scene, however, the sheer number of investing options — and new terminology — can feel overwhelming.
Here are some tips to get you started on the right track:
1) Know the relation between market cap and circulating supply
New cryptocurrency investors may be intimidated by the new vocabulary they need to learn and how these different terms affect pricing. For example, the “market cap” for a particular coin is used to determine the total value of coins on the market. This number is determined by multiplying the coin’s circulating supply by its current price.
The use of the circulating supply, rather than the total supply, is an important distinction. For a variety of reasons, some coins are not available on the public market. Because they aren’t available for trading, they are not counted toward price considerations or the market cap.
2) Keep up with current market conditions
You can read articles debating the pros and cons of various cryptocurrencies, but current market data will always be the most reliable source for identifying trends and making smarter trading decisions.
Fortunately, there are several websites dedicated to providing up-to-the-minute updates regarding changes in price, supply and market cap. Coincap, CoinMarketCap, and CryptoCompare are just a few examples of resources that help investors stay up to date on current prices. Data that is updated in real-time is paired with charts tracking changes over 24-hour and seven-day periods to give investors a better idea of current trends.
3) Follow the leaders
Even when you have real-time data available, making a trading decision based on a “top 100 cryptocurrencies” list can be intimidating.
However, when this data is paired with guidance from top investors, you can have greater confidence in your decisions and even learn a few extra pointers along the way.
Sites like eToro utilize what is known as a “social trading” program that allows top investors to share their knowledge and trading practices.
4) Diversification is vital for success
As with traditional investment opportunities, diversification is essential if you wish to come out a financial winner in cryptocurrencies. With a more diversified portfolio, you reduce your overall risk, especially if you invest in coins and tokens that service different sectors.
This also means you should continue to invest in non-crypto spheres. These practices maximize your potential return while alleviating the risk should a particular coin or stock go under.
5) Understand which factors influence pricing
What causes cryptocurrency prices to rise and fall? Though supply and demand certainly play a role, crypto investors should carefully consider the perceived utility of a cryptocurrency. If a coin is perceived as having several practical applications, it will be more highly sought-after, and therefore, increase in price.
As MyCryptopedia explains, mining difficulty is another major factor that affects pricing: “A higher mining difficulty means that it is harder to mine an additional unit of a coin. This can have an impact on a coin’s perceived value, and subsequently, its price, as increasing a coin’s supply will require more computing power to be used in the mining process.”
Savvy investors should also pay attention to news headlines regarding different coins and tokens. Positive or negative articles will often have a direct correlation on future pricing trends.
6) Research individual coins and tokens
Cryptocurrencies have frequently been called out as nothing more than a scam by skeptical individuals.