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How to find the next big cryptocurrency

James
4 mn

While Bitcoin has been on the scene for over a decade it was really only in the last few years that traditional investors took notice. Observing early investors making exorbitant returns on the cryptocurrency's rapid growth, many decided to enter the crypto investment game with the hopes of achieving the same.

While Bitcoin continues to provide healthy returns, many are looking for the "next big thing" in the crypto markets, hoping to tap into a metaphorical gold mine and save money and time compared to other investment opportunities.

While this is certainly still possible, there are a number of factors one should consider before taking the plunge into blockchain investments. Aside from the golden rule of never investing more than you're willing to lose, we've compiled a list of factors to consider when it comes to deciding which cryptocurrencies to buy in the pursuit of the next big thing. 

How to find the next big cryptocurrency

With the crypto markets growing by the day, and adoption rates at an all-time high, the possibilities are endless when it comes to cryptocurrencies integrating into the mainstream world. Below we outline several factors to consider when it comes to finding that next big thing.

Price: Buy In Cost

While $5,000 might get you a small portion of Bitcoin, it could also get you thousands of a low-cost cryptocurrency (trading for under a dollar), making it an ideal investment that could potentially equate to millions. Considering the buy-in cost for a new cryptocurrency is crucial, we're looking for low risk, high reward. 

Prospect: Adoption Opportunities

Consider the project behind the token and how it fares against its competitors. A blockchain platform with a high potential for adoption is likely to be more successful than another replica of a payment (medium of exchange) coin. Consider what value the project brings to the industry, how well it has been received, and compare it against its competitors to establish whether this has what it takes.

Supply & Demand: Maximum Supply

A good indicator when it comes to establishing a coin's future value is its supply. Typically, coins will have a maximum supply that is reached through processes like mining. It's worth noting that digital currencies like Ethereum and Dogecoin have infinite supplies. Based on basic economics, the higher the demand and lower the supply, the higher the price. Check to see the project's maximum supply, how new coins enter circulation, and the current circulating supply before you bank on a project going to the moon.

These outline the three main factors, although there are of course other areas to consider:

Trading Volume

Trading volumes indicate how much the coin is used. While ideally, you're looking to get in early on a new cryptocurrency, consider having a look at the coin's trading volume to assess its popularity and present use case. 

Developer Activity

This refers to the amount of work that is being done on the project from its community of developers. The higher the developer activity, the better. Use Github to observe the level of developer activity, look out for things like the number of updates it has undergone; how many forks have been created; how many watchers there are; and the total number of stars the project has received.

Community Activity

As important as the developer activity is how big and engaging the project's community is. Through various channels, you can observe the coin's following, the bigger the better. Look out for channels on Twitter, Telegram, forums and Reddit.

With hundreds of new coins entering the market not every launch can be a success, hence the importance to do thorough research on a project before investing in it. Airdrops and crypto forums like Reddit are great places to find new coins, but from our experience ensure that you do your own analysis on top of that.

Diversify your portfolio

If you're not looking to throw all your eggs into one basket, consider testing the market with several coins building up a diversified portfolio. Sure the big coins like Bitcoin and Ethereum are great at bringing about returns, but incorporating a few smaller coins might help you build your portfolio and leverage on the returns of smaller coins. When it comes to learning how to find the next big cryptocurrency, research at the end of the day is key.

We're not here to offer financial advice, simply to help you on your journey to building a balanced and reliable cryptocurrency portfolio. More importantly than that, we're here to assist with easily buying and selling digital assets, providing a secure place in which to store them and a user-friendly way in which to manage your portfolio. Savvy investors can also access our Earn program service where users can generate yield on their crypto & fiat holdings. Earn up to 5% APY for a range of crypto and fiat currencies (British Pound and Euro). Head to the Tap website to learn more and download the relevant mobile app for your device.

 

Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions or other material as financial advice. The information herein does not constitute an offer to sell or the solicitation to purchase/invest in any crypto assets and is not to be taken as a recommendation that any particular investment or trading approach is appropriate for any specific person. There is a possibility of a risk in investing in crypto assets and investors are exposed to fluctuations in the crypto asset market whether you reside in the UK, EU or elsewhere. This communication should be read in conjunction with Tap's Terms and Conditions and regulations in your jurisdiction.