How To Invest in Cryptocurrencies Smartly: Metrics & Terms Explained
Investing in cryptocurrency is considered to be the following ways: purchasing and holding crypto, mining, and staking.
Right now we’ll have a closer look at them.
Buy and Hold (HODL)
Nowadays the world of crypto changes and grows too fast. We should all come to terms with this and move on. But don’t live a chance for despair! Anyway, it’s always the right moment to start investing. Right education comes first:
— coinsocialstory.com — is here for you with useful metrics and necessary analytics. And now let’s pass over to the metric’s definitions.
Within the blockchain industry, the term market capitalization refers to a metric that measures the relative size of a cryptocurrency. It is calculated by multiplying the current market price of a particular coin or token with the total number of coins in circulation.
Volume is the number of units sold in the market during a given time.
The circulating supply is the number of cryptocurrency coins or tokens that are publicly available and traded in the market.
This is the current price at which you can buy or sell assets. The market price shows the intersection of supply and demand at one point.
The market price falls under some influence of state laws and regulations. Also, the utility of tokens has a predominantly significant influence on it.
The bottom line is that the coin must have its specific utility and potential for use in the long term. And when it is released to simply exist, as it happened in a viral format among businessmen and investors in 2017, then it loses all its value, since it has no further future.
First, always review the projects’ white paper to educate yourself about the utility and benefits of tokens you are interested in.
Second, create your impression of the coin with the help of the opinions and knowledge of other people in the project’s social media ( like Twitter and Reddit) and forums dedicated to it. Communicate about peoples’ goals and strategies for coin projects. Thus you can develop your clear strategy based on the knowledge you gained.
To avoid scam projects, do some simple research. First of all, you should find out the information about the development team. All team members must be real people with open social media pages. Check their bios and what projects they’ve been involved in within the past.
These simple tips will help you get started on your cryptocurrency investing journey. Nevertheless don’t be scammed by just holding your virtual money, unless you want them to be subject to inflation. If you want to increase your assets, you need to pay attention to mining and staking — the main crypto investments.
We should understand the value of consensus algorithms in the blockchain if we want to know the mechanism of earning cryptocurrency.
There are no banks and control centers in cryptocurrencies that keep records of transactions. Balances and transactions are recorded on the blockchain and every user has a copy of it.
There is a system called Proof of Work which coordinates participants, which are called miners or validators. Their work is to verify transactions and create new blocks. They get an award for this work. To rob PoW consensus participants of malicious behavior, they must validate transactions using expensive hardware and vast resources. If the validator has malicious intent, then other participants report it. Then the attacker has no way to verify the transactions.
The rules of consensus Proof of Stake say that miners are required to stake several coins to get permission to check transactions and receive rewards.
Crypto mining means gaining cryptocurrencies by solving cryptographic equations through the use of computers. Miners are using computing power for solving math equations. They ensure consensus algorithm Proof of Work for the network. It verifies transactions and creates new tokens through this process. Miners receive their reward for this work.
Even though it is one person or a group of people — everyone can start mining crypto if he has basic coding skills and significantly expensive equipment. Within a time this equipment requires more power for solving complex math equations. Thus, it will be more expensive for miners.
Mining equipment varies according to the complexity of verifying bitcoin transactions. ASIC chips are used for bitcoin mining. For proving transactions of other networks NVIDIA and Advanced Micro Devices are used.
Etherium is going to move to the consensus algorithm Proof of Stake. It requires less electricity than the mining process. Participants should stake their coins for transaction validation. If you stake more coins then you’ll have a bigger chance that your node could be chosen for transactions’ validation and creation of a new block. The consensus algorithm of Proof of Stake has a voting system. Some stakeholders can vote for multiple delegates. They will also protect the network on their behalf. Stakeholders receive rewards for that.
Investing in cryptocurrencies has become more profitable in recent years, despite their high risk. Nevertheless, like with any kind of investment or financial transaction, it is important to know where you are investing your money.