When it comes to making a little extra cash or even attempting to generate a second income online, it’s no secret that cryptocurrency trading is fast becoming the choice for a host of individuals; from all walks of life and around the world.
The markets are now more accessible than ever before and can prove to be lucrative with the right support and know-how, such as trading robots and market insights, but there are still pitfalls to be considered to ensure you don’t suffer significant losses. With this in mind, it can be especially important to consider the top metrics you’ll need when selecting a crypto to trade with, if you’re considering getting involved.
What are metrics?
In everyday life, the factors you use to weigh up your options and make a decision are known as metrics. When thinking about cryptocurrencies, taking key metrics into consideration will help you to make a better-educated financial decision that could increase successful endeavors and minimize losses (the wrong decision however, will likely do the opposite). The best ones will help to define some of the following points:
- The current levels of interest in the crypto market
- How successful a coin has been in the past and what that spells for existing values
- The future potential should your chosen coin stay in favor
- Determine the coins/new projects that have a high growth potential
- Whether you should buy, sell, or hold your chosen coin
- Remove any biases that may arise when making decisions
Top crypto metrics
As there has been a surging interest and applications for cryptocurrencies in the past few years, there is now more information than ever before out there that can assist in your choices and endeavors, so it makes sense to utilize them wherever possible. The following metrics are simple to learn more about around the internet, so let’s take a closer look at the ones you’ll need to make more worthwhile decisions for your finances.
One of the most important metrics at your disposal when choosing a cryptocurrency is going to be market capitalisation, often shortened to market cap, which is determined by the total value of a particular crypto project. The good news is that all you’ll need is a simple equation to determine this; current coin price x current circulating supply.
This is a key financial indicator, as it gives insight into how much collateral has been invested into the network so far and offers a basis for comparison for the value, success of and potential of other coins. This actually gives two opposing outcomes for traders and investors, as the greater the market cap the more stable the project is likely to be, but that’s not to say that there isn’t potential when the number is lower as the growth potential can also be an attractive factor. You can find out more about the best cryptocurrency to buy now at https://cryptonews.com/news/best-crypto-to-buy.htm.
Major metrics to pay attention to are the price fluctuations in cryptocurrencies, as these can play a role in the way you trade the coins you choose. You may have the aim of holding crypto that has the potential to appreciate in value or buying and selling for short-term financial worth, so bullish and bearish market sentiment due to price fluctuations can provide important information regarding recent price action.
There is a lot to be said about the impact of social media on the way individuals interact with the products and services around them and this can also be said for cryptocurrencies. There is often a certain mentality between groups of traders when it comes to the way in which some coins are viewed – and a good example of this is meme coins like DOGE, which was created with the sole purpose of challenging the market.
Social media can tell you Key Performance Indicators (KPIs), such as how popular a coin or project is, give you a more user-centric view of engagement and provide access to a more diverse wealth of learning materials, such as instant updates on current financial events, constructive opinions from everyday individuals with varying interactions with the niche and potential challenging views on how coins are considered and performing.
When buying and selling crypto, there is an anomaly known as the ‘unit price bias’ – and this is where those in the niche make the mistake of buying options with a low unit price with the idea that volume will equate to profit. As those with low units are often new to the market or underperforming, this can prove to be a big mistake. Supply metrics can be a good indicator of how a coin is performing and can help you to get a better-rounded view alongside the other metrics in this list, but be aware that they are not always entirely accurate.
The maximum supply that a crypto will fill should also be taken into consideration, as this is the total amount of coins that are allowed to be in circulation (due to a host of factors). This cap helps to keep inflation down and can ensure continued asset appreciation, but once the max supply is reached, fewer coins will be available, creating market scarcity and potentially prompting deflation.
How to best utilise financial metrics to select the right crypto
The best tool in your arsenal will be research, so be sure to take in as much information as possible before selecting the digital currency you want to get involved with. Once you have made your decision, you can continue to use these indicators to perform regular market performance checks for the best times to buy and sell for maximum profit potential. As many of these use historical data to provide information, also keeping on top of trending news and current market events will help your efforts even further.