Even with cryptocurrency’s unfortunate downfall back in 2018, they’re making a comeback, and with considerable momentum. Because of that, plenty of new cryptocurrencies are popping left and right, finding their places in the market of cryptocurrencies. They aren’t half-bad either, as they have promised great returns for anyone willing to invest in them. In fact, the rewards have attracted even the best of investors to take their chances in playing around with cryptocurrency’s volatile market.
If you’re one of those who’ve been attracted by the sweet smell of success of cryptocurrencies, here are four questions you’ll have to ask yourself before taking on the venture:
1. Is there a market for the cryptocurrency?
Without demand, there cannot be a supply. One cannot exist without the other, and that’s why a cryptocurrency must have a market for it to exist in the first place. If you’re looking at currency and wondering what is driving it to exist, then you should probably ignore it and look for something else a little more promising.
2. Does the cryptocurrency have a realistic goal?
Startups can promise many things, such as an increase of value in the next month by 1,000 percent. Of course, this is often unrealistic. You should keep an eye out on promises like these. Ask yourself whether or not the goals set for the currency are achievable and how the company is going to reach that goal. If you’re finding it hard to believe that the target can be achieved, or the numbers are just too good to be true, then you are probably right.
3. Should there be a blockchain?
If you don’t know what blockchain is, it pretty much is technology where every transaction that occurs (usually with cryptocurrency) within the blockchain gets recorded in each block, like a ledger. The reason for its existence is to provide control over the currency.
With that, many startups incorporate blockchain over their currency. However, sometimes, this isn’t needed. If you find that the startup company is only using a blockchain because it is the trend rather than using it to solve an ongoing problem, be wary about the reliability of the cryptocurrency.
4. Is there a reason for the cryptocurrency’s existence?
For every product or service that exists in the market, there should be a “why” for it. Why does it exist? This is the question you must ask when looking at new cryptocurrencies.
In most cases, the answer to the “why” is that the cryptocurrency exists to solve an existing problem. Whether it offers a brand new way of working with money or offers a little tweak to improve a current service or product, the value of the currency comes from its ability to create a tangible benefit for its users. With that said, if you’re struggling to figure out how the existence of such a currency can benefit people in real-world applications, don’t stick with it.
By asking yourself these four questions, you can be sure that the cryptocurrency of choice gives you the best chances of enjoying a great return on investment. Remember, do plenty of research and ask as many questions as possible. Only this way can you find success in your ventures.
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