Looking to invest in cryptos, but overwhelmed by the gigantic offer? Here are 5 tips on how you can analyse the different coins and decide which ones suit you best.
The most important coin characteristics
Anyone can create their own crypto token with the proper know-how. Therefore, as of 2022, there are over 10,000 different tokens. Keeping an overview and deciding which coin to invest in is therefore not an easy task. Which Coins are safe or future-oriented? When making your choice, pay attention to the following:
Market capitalisation / ranking
Tip 1: Check market capitalisation
The market capitalisation is the total value of all coins created for the corresponding currency. The term can be compared to the stock market value. The market capitalisation is calculated by multiplying the number of coins in circulation by the current market price.
Market capitalisation = number of coins in circulation x market price
Bitcoin has a market capitalisation of € 478,433,990,071 as of 22.05.2023, Polkadot for instance € 5,795,489,027. This automatically results in a ranking. The tokens with the highest market capitalisation have the most coins in circulation at the best market prices. Therefore, this factor is an excellent way to compare the quality of the coins with each other.
Tip 2: Trading volume
The trading volume stands for the number of traded cryptos in a certain period of time. We recommend observing the volume of the last 24-48 hours, as the crypto market is highly volatile. If the volume increases, the coin is being traded frequently. Pay attention to the course of the price under tip 3 and observe whether more is being bought or sold. If more is bought, the price rises. If demand collapses and more is sold, the price becomes more affordable.
Volume is different from turnover or market capitalisation. For example, if 1,000 coins are traded at a price of USD 5.- on one day, the turnover is USD 5,000.-, but the volume is still only 1,000 units.
The trading volume is usually displayed with a candle-stick chart. The vertical bars differ in height. The higher the bar, the higher the trading volume. The colours of the bars also indicate whether the trend is more towards buying or selling.
Tip 3: Course / Price development
The price curve represents the performance of the currency. How has the price developed in the past? Has the price risen or fallen? The price development shows you immediately whether the market was more bullish or bearish over a period of time defined by you.
The chart gives you an overview of the history of the development. A good indication of the quality of the coin is when the graph displays stable behaviour - preferably a stable upward movement. You can also use the graph to interpret whether the price has historically recovered when prices have fallen. Remember, however, that this data is only representative of the past.
Tip 4: Business Case
Have you ever heard of Shitcoins? Shitcoins are crypto assets whose future in the crypto world is not yet clear. That's because they usually have no or no convincing business case backing them.
There are exciting projects behind many coins. But they still have to prove themselves first. Therefore, before investing, check the business case of the coin and convince yourself whether the project appeals to you and you see a future in it.
Tip 5: Volatility
The crypto market is notoriously volatile. This means that prices fluctuate dramatically and quickly. When you buy a coin, it can be worth a lot more or less within a short period of time and therefore the risk of a loss is greater or the chance of a profit is higher. The volatility is shown for many coins. This allows you to decide for yourself how much risk you want to take in terms of price fluctuations.
If you are a risk taker, choose a coin that has a high volatility.
Are you more security-conscious? Then choose a coin that does not fluctuate so much. In this case, stablecoins would be a good option. Stablecoins are crypto assets that are linked to a real value, such as the US dollar or gold, and thus enable the most stable development possible. You can invest in stablecoins quickly and easily on the Cointract app.
Easy to use trading platforms
Independent platforms like coinmarketcap.com offer a great overview of current crypto assessments.
The Cointract app also lists all the comparison factors for each coin. This makes it easy for you to get an overview of the coins and make an informed decision about what to buy.
You can check different time periods in the price history. You can also zoom in on the curve so that you can see more or less.
The trend barometer shows you the current mood on the market - are people buying or selling? It analyses the buying behaviour of active users on the stock exchange.
The key figures give you a quick overview of the prices, the performance, the market ranking and the important comparison factor "market capitalisation".
The spider graphic shows you the characteristics of the coin: it visualises performance, market capitalisation, trading volume, volatility and the correlation to bitcoin.
In the description you will find details about the project and the business case.
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This article is for informational / promotional purposes.