This is post #2 of my beginners guide to crypto investing, "Cypto 101". Today we are going to talk about the difference between investing in high value projects, as opposed to low price cryptos.
Introduction:
There is a world of difference between price and value and we will delve deeper here today.
First, I've been investing in crypto for about four months now and so I am not an expert but I have learned from my mistakes and I do countless hours of research every day, so give me a chance and hopefully whether you are a newbie or a vet you might appreciate some part of today's post.
Price vs. Value:
Price is what you pay to buy a particular crypto; Value is what it’s worth.
What am I hoping to accomplish with this post?
Unfortunately I hear all the time, buy this cheap crypto and you will have millions of tokens, as if the number of tokens you have is in anyway a meaningful implication to investment value: It isn’t.
My hope today is to convince you of one basic investing tip, always invest in projects you personally believe have high VALUE, and forget about trying to find projects that have low PRICE.
Why low price is irrelevant when investing:
When investing, your first question should always be how much is it worth, and THEN, and only then, how much does it cost?
A small price is not always a good price.
Cheap is not synonymous with Good Value:
A cheap coin is not necessarily a good coin. Price by itself is a useless consideration when considering how to invest your money in cryptocurrency. Having 10,000 tokens that have no use case, and no plan to generate revenue likely means that you have 10,000 units of crap, which will eventually be worthless. On the other hand having a fraction of a quality project, with vision, goals, and talent to execute that vision is in the long run a much better investment.
Only after you are first equipped with an informed opinion of a project’s value can begin to properly assess if the price is good or bad. Just because something has a low price, doesn’t mean it is worth your money.
You should never ask how much does it cost, but rather how much is it worth. Then with that knowledge of value you can decide if the price is good or bad.
The importance of value and how to assess it:
Value always leads price in the long run. If an idea is excellent and its team can execute as promised that project will rise in price to reflect its value. For that reason identifying high value projects is always your first step, but how do we do that?
The process of assessing value is slow and boring; it involves research and hard work. If you want to take this analysis seriously you need to spend countless hours online reading whitepapers, watching thoughtful analysis from trusted experts, you should look for opinions from promoters and detractors. And all of this will only begin the conversation. But as difficult as it may seem this is the best way to plan for long term investment success.
The value of a cryptocurrency is determined by several factors:
- What is the use case?
- What is the market value for that idea?
- Who are their top competitors?
- What are the top competitors valued at?
- How does the cryptocurrency set itself apart from its competitors? For better or worse?
- Who is the team, and what is their skill level? Do they have meaningful experience in the field?
- And more broadly, how likely is it that the project will fulfil its potential and replace its competitors?
Practical tips to find great Value:
- Research: Identify good cryptos with innovative solutions to existing problem(s). Analyse the team, are they technically trained, and experienced in the field?
- Use Coinmarketcap to search top 100 coins for greatest percentage decrease on the day. Those can be huge opportunities.
- Don’t FOMO: As a rule, never buy in the green. The only reason to buy a coin that is up today is because you fear it will never be cheaper. Almost always it will. If you buy while it’s up you may gain today but you will pick up serious bags one of these days.
- Buy the dip: it’s easy to say but hard to do. You need to decide which projects you like enough to bet on and then every time they dip snag more. Months might go by but if you continue to believe in the team and their potential keep buying dips. This is how you make major gains.
Summary:
Crypto investors need to recognize that buying a crap load of junk tokens is not the best means to financial success. Right now the world has crypto fever but one day the bear market will settle in and when the tide recedes crap tokens are not gonna float any longer.
Buy cryptocurrency because of great perceived value, not because they have a low price. Certainly it is wise to buy good projects while their price is down, and in that way price is relevant, but without knowing the intrinsic value, you cannot possibly predict future price.
And remember that if you invest $1,000 USD which goes up by 100%, the gain is the same whether you bought 10 million crap tokens, or a fraction of a larger crypto like BTC or ETH.
Conclusion:
The critical analysis involved in ascertaining a particular investment's "value" is always worth taking the time to do, particularly if you are investing your own hard earned money. If you understand the intrinsic value of a project you can more often than not forsee its eventual price action, and thereby make a living through investment and trading.
Knowledge is power, equip yourself wisely before investing.
As I said before I am not an expert in investing, I am just a guy talking about my interests on the internet. I hope this has been helpful for you, if so please consider up-voting, commenting, following and resteeming.
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