Cryptocurrencies have grown from becoming an irrelevant investment into a highly profitable venture. Investors who were lucky to enter into the space when it launched in 2009 have amassed a fortune.
For instance, $1 in 2009 could fetch more than 33 units of BTC (over $877,090 at today’s prices).
I know you must be thinking about why you did not take advantage of the opportunity when it presented itself, but it is not too late to join the investment.
Despite the opportunities associated with cryptos, there are also significant risks, ranging from asset theft to high volatility.
However, crypto investments have continued to gain traction from both retail and institutional investors.
Even as cryptocurrencies keep gaining traction, potential investors are still considering whether it is a good investment given the risk. We understand your fears, which is why we have compiled a list of questions that would help you record success in the industry.
- Is The Cryptocurrency Team Credible?
It would be best to research the developers of the cryptocurrency you want to invest in because their profile, good or bad, will largely influence your success in the market.
Your research should cover the team’s background, especially whether they have any past criminal dealings.
Certainly, you will not be the only one considering to put money on the crypto. If a project has past criminal records, people may avoid interacting with the asset, thus causing its value to plunge.
In the past, cryptocurrency news has reported how developers of a crypto had wanted to act smart by increasing the asset’s max supply in their favor, months after putting the asset on the market.
This action, as always, causes the crypto value to fall by a large margin.
- What is Unique About The Cryptocurrency?
For a cryptocurrency to build momentum over time, it needs to stand out among existing cryptocurrencies.
According to data CoinMarketCap, there are more than 4,000 cryptocurrencies, with each trying to gain a significant amount of the market share.
However, what would make investors consider a particular project over another is its ability to solve particular problems that may lead to widespread adoption.
When a cryptocurrency is widely adopted, its value is bound to soar tremendously.
- What Is The Crypto Max Supply?
Bitcoin is considered as a hedge against inflation and a store of value because of its limited supply.
The coin is designed to have only 21 million coins, which has contributed to the growth of the cryptocurrency.
You need to consider the crypto’s max supply before investing. If the token has a large max supply that runs into hundreds of millions or billions, as the case may be, then it is inevitable that its value will have very little or no growth.
Simply put, the larger a crypto max supply, the little its value spikes, and vice versa.
- How Frequent Will The Cryptocurrency Get Important upgrades?
Some projects’ developers usually go to sleep the moment the cryptocurrency launches.
They forget that the network may encounter some bugs that can only be fixed via relevant upgrades.
Nobody would like to adopt a crypto project that does not get periodic updates. If the crypto developers fail to release useful upgrades despite reported bugs, exchanges with the crypto listed on their platforms could delist it, thus reducing its liquidity.
- How Does Your Cryptocurrency Generate New Coins?
There are two methods networks used to produce new coins for a cryptocurrency.
The cryptocurrency may use a Proof-of-Work (PoW) or Proof-of-Stake(PoS), model. For the former, crypto miners are rewarded with new coins to validate and record transactions performed by network users on a blockchain.
On the other hand, the PoS model requires network users to stake their cryptocurrency for a specific period to get newly minted coins.
The model your crypto developers use will determine how fast transaction confirmations will be, among other things.
- What Are Crypto Risks?
Like with other financial assets, cryptocurrencies have a significant amount of risks. Cryptos are highly volatile, which can cause an asset class to lose a large percentage of its value.
Also, funds can get stolen on cryptocurrency exchanges or when a hacker gains access to your wallet.
You should invest what you can afford to lose and adopt necessary security measures like enabling Google two-factor authentication (2FA) to keep you safe.
- Can The Crypto Survive Regulatory Sanction?
We have seen how promising projects have gone into oblivion due to regulatory scrutiny.
The project’s team’s strength will determine whether it will survive regulatory sanctions in the event when it is flagged to have breached specific laws.
However, you should try to conduct due diligence about a cryptocurrency before adopting it to avoid sad stories.
You do not have to assume that a cryptocurrency has what it takes to make you maximum profit without first asking yourself these questions.
The questions above will determine the value potential and sustainability of your cryptocurrency.