Cryptocurrencies are digital money that exists on the network and do not have a physical form. They have many use cases, the main of which are trading and investment. Since crypto prices are incredibly volatile, they open many earning possibilities for traders. At the same time, this high volatility is the reason for huge losses traders often bear. Are profits outweighing the losses? Difficult to say. It all depends on what asset we talk about.
In this article, we will outline crucial things to pay attention to when picking a crypto asset and explain how buy cryptocurrency.
How Can We Analyse the Risk and Profit Before We Buy Cryptocurrencies?
Look at the crypto ranking on the Coinmarketcap resource, and you will see coins listed in order. Let’s discuss some crucial indicators that help assess crypto coins:
- Market capitalization. The bigger this indicator, the higher the asset on the ranking. Undoubtedly, Bitcoin is the leader, with a market cap of over $322 billion. Market capitalization is the overall value of all the crypto coins that were issued, calculated by the number of coins in circulation multiplied by the current price.
- Another crucial indicator is trade volume. In simple terms, this indicator shows the level of the coins popularly. Trade volume is the number of times a coin changes owner during a certain period of time. The bigger the demand for the coin, the bigger the trade volume.
- Another crucial indicator of crypto assets is liquidity. The most liquid digital assets are those that can always and easily be sold to someone else, converted to another coin, etc., without affecting its price. That is, such a coin is always in demand and always wanted.
- Price chart. By analyzing crypto price charts, we can see how much it changes and match it with events that happened at that time. It helps to understand what affects the crypto price and how much it changes during the market’s ups and downs.
Our conclusion is that the higher the trade volume, market cap, and the more liquidity of a crypto asset, the lower the risk that its price will drop and you will lose money. So pick among the top traded crypto assets and learn trading strategies to help you manage your capital wisely and make a profit.
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