How to assess investment yield in cryptocurrency
The world of cryptocurrencies has exploded in the last decade, with new coins and chips being launched every day. While many investors have entered the market with high hopes and expectations, reality is often much more complex. With such uncertainty and volatility associated with cryptocurrency investments, it can be difficult to separate the noise signal and make informed investment decisions.
In this article, we will explore how to evaluate the yield of investments in cryptocurrency and offer you a comprehensive guide to help you browse the market.
understanding of cryptocurrency investments
Before we sinking into evaluation techniques, let us first understand what cryptocurrency investments. Cryptocurrencies are digital or virtual currencies that use cryptography for decentralized security and control. They operate independently of central banks and governments, allowing users to send them, receive and trading them directly, without the need for intermediaries.
The investment in cryptocurrencies can be done through different platforms, including exchanges, brokerage accounts and individual wallet applications. Each platform has its own set of rules, taxes and requirements for buying, selling and holding cryptocurrencies.
Investment yield assessment: A step by step guide
To assess investment yield in cryptocurrency, follow these steps:
- Define investment goals : Before investing in cryptocurrency, it is essential to define your investment goals. Looking for short -term earnings or long -term increase? Do you want to diversify your portfolio or focus on a certain class of assets?
- Research cryptocurrency : research cryptocurrency in which you are interested in investing. Look:
* Blockchain technology : Understand how the basic infrastructure works.
* Development team and counselors : Check if the development team is experienced, credible and transparent about their goals.
* market capitalization
: Compare the market capitalization of different cryptocurrencies to understand the size of the market.
- Evaluates Technical Indicators : Technical indicators can provide valuable information on prices, tendencies and volatility of a cryptocurrency. Some popular technical indicators include:
* Mobile environments : average prices over a certain period (for example, 50 days, 200 days).
* Relative resistance index (RSI) : Measure the speed and change of price movements.
* Bollinger bands : comprises two standard deviations and a mobile average.
- Analyze the market feeling
: The market feeling can indicate investors’ confidence in the value of a cryptocurrency. Analysis:
* Trendlines : plot lines showing potential purchase or sale signals.
* Support and resistance levels : Identify areas where prices tend to jump or break.
- evaluates the volume of liquidity and trading : Liquidity measures the ease of buying and selling a currency, while the trading volume indicates the market activity. Search for:
* High liquidity : A low standard deviation and high trading volumes may indicate greater stability.
* Increased trading volume : Increased trading volume may signal the interest in cryptocurrency.
- evaluates risk tolerance : Cryptocurrency investments present a significant risk. Evaluates -Risk tolerance Evaluating:
* Volatility : Do you understand how much you are willing to lose or earn with each trade.
* Factors of fear and greed : Be aware of the emotional prejudices that can lead investment decisions.
- Consider alternative values : In addition to financial values, consider alternative methods to assess cryptocurrency yields, such as:
* Network effects : Evaluate the value of a cryptocurrency based on its network size and users growth.