Investing can be confusing enough as it is. Throw in digital currencies, and it’s easy to see how even seasoned investors might feel bewildered. Like anything worthwhile, however, getting involved in cryptocurrency is much easier when you do your homework.
Where should you start learning? Adoption rates and market capitalizations, also known as market caps, are two common indicators of where different cryptocurrencies might be headed. These pointers might make the distinctions easier to comprehend.
Cryptocurrency Adoption Rates
Adoption rate trends measure how many people use new technologies over time. When it comes to digital assets, you can break such adoption rates down by individual cryptocurrency types, wallet software, whether the user is a merchant and other factors. At the same time, things may not be quite as straightforward as they would with other adoption rate assessments, such as the percentage of smartphone users who prefer Android or iOS devices.
Part of the confusion has to do with the fact that cryptocurrencies are tailor-made for anonymity. For instance, anyone can download a crypto wallet client and generate multiple payment addresses. You also don’t have to provide your name or personal information to complete a transaction. This makes it harder to gauge how many people own a particular cryptocurrency, so smart investors rarely make adoption rates their sole criteria.
Market Capitalization in the Crypto Realm
Market capitalization is a familiar concept to those who invest in assets like stocks. In short, it signifies the total valuation of the outstanding shares of a publicly traded company. In other words, it’s computed by multiplying the total number of all existing shares by the price per share.
Market capitalization is similar in the cryptocurrency world: Each cryptocurrency, such as GoldCoin or Litecoin, has its own value, and each generates coins at a predetermined rate to minimize inflation, so it’s always possible to see how many there are. To compute the market cap for a given crypto, you simply multiply the value per coin by the current number of coins.
Market capitalization is often used as an indicator of user confidence in a given cryptocurrency, but it’s not the end-all decider of where you should invest. As you might when picking a stock, it’s wise to view market capitalization in light of a currency’s other strengths. For instance, a company with a high valuation might be a poor investment choice if its leadership continually makes bad decisions. Cryptocurrencies that lack robust code features or suffer from contentious development cycles may temporarily achieve high market caps, but without strong foundations, their popularity is almost sure to fade.
Transforming Stats Into Actionable Data: What Should You Go By?
Market caps and adoption rates are just two hallmarks of an extensive cryptocurrency environment. It’s only natural to look at such factors when you’re trying to decide where to invest, but you also need to understand their historical context. A cryptocurrency with a massive adoption rate but a low market cap could be a great tool for making low-cost transactions, but it might not function quite as effectively for building long-term wealth.
There’s no universal rule for judging a cryptocurrency’s investment potential.
The numbers are important, but without context, they can’t tell the whole story. Learn about the background behind each opportunity. Then, pick the ones that are supported by sound logic and strong user communities.
Why jump on bandwagons based on uncertain trends when its easy to explore the pros and cons of individual crypto coins and make an educated decision for yourself? To start getting informed, check out the GoldCoin community online.
Learn more about fortifying your investment plan. Jump into the GoldCoin Talk chat today on Telegram.