Investing in the crypto world can seem challenging and confusing for some. However, endless online resources and options are available for new investors looking to learn and participate in the crypto exchange. Investors today have the option of over nineteen thousand different cryptocurrencies to invest with. While searching for the best cryptocurrency for your next investment, here are a few things to consider.
Join an Online Community
The digital community surrounding a specific cryptocurrency can offer a lot of insight into the long-term sustainability of that particular coin. Cryptocurrencies and blockchain networks are only successful if investors and trader utilize their currencies and platforms. Crypto with large followings and many users worldwide are more likely to see long-term success and offer you the financial opportunity you seek. Joining an online community of crypto enthusiasts and experts can also help you make more informed investment decisions and stay up to date on the latest crypto projects.
The utility of a particular cryptocurrency is another essential thing to consider when planning your investments. Some blockchains like the Ethereum blockchain hold NFTs, which can also be bought and sold using that blockchain’s cryptocurrency. This utility will help sustain the Ethereum blockchain for years as investors participate in NFT collection. Beyond NFTs, specific cryptocurrencies can be used to purchase real-life assets like real estate or are accepted through various online vendors as well. What you can actually buy with a particular cryptocurrency is an important consideration when investing.
Read the Whitepaper
Tokenomics is part of the basics of cryptocurrency. Tokenomics has to do with the rules and regulations built into the design of any new crypto token. Some tokens are designed with unique benefits that incentivize traders to invest, hold, and trade the new token. Token designs can include a deflationary burn mechanism to maintain the coin’s value over time, airdrops of free tokens, and much more. Some tokens, like the new FTX token, FTT, even offer their coin holders the opportunity to attend private events and share their ideas for the future governance of the token. You can learn more about the motivations and goals behind each new token through its whitepaper.
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Select the Right Exchange
The crypto exchange you select will significantly impact your experience trading and investing in cryptocurrency. Most popular exchanges are centralized, meaning they act as a third party between traders, charge fees, etc., but are generally user-friendly and typically offer a helpful knowledge base and resources for new investors. Other exchanges are decentralized exchanges that use smart contracts to complete transactions between traders rather than acting as an intermediary and collecting a fee. Decentralized exchanges, DEXs, are less user-friendly and do not have many resources or users that centralized exchanges offer. Depending on your trading habits, you may consider the benefits of a DEX vs. a centralized platform.
Long-Term Investment Options
Finally, when selecting the best cryptocurrency for your financial goals, consider its long-term investment options. Some cryptocurrencies built on proof-of-stake blockchains can be locked into a stake pool to generate long-term rewards. Users on these networks can stake their coins together for a greater chance of being selected to verify transactions on the blockchain. For each successful transaction, rewards are generated for all users in the pool. Another great long-term investment option is yield-farming or liquidity-farming. This is when you lock your funds into a liquidity pool where your coins are then lent out to others on the network in exchange for fees and other rewards. These long-term investment options can help you generate tremendous returns on your investment but also carry risks.
It would help if you understood these basics of cryptocurrency before making your first investment. You can learn more about investing in crypto by joining an online crypto community such as FTX.