The cryptocurrency market has been expanding pretty fast, especially in recent years, with the invention of decentralized finance (DeFi). There are more than 5,000 crypto tokens in circulation out there and more are coming out every day, so it’s difficult to decide which cryptocurrency to invest in or when to invest in. We understand that it is very difficult for every retail investor to evaluate correctly cryptocurrencies and blockchain projects. So, we use metrics and techniques to evaluate cryptocurrencies that are different from forex and other markets, especially when analyzing crypto fundamentals. Below we explain how we evaluate cryptocurrencies in order to benefit the most from them, since this market offers great trading opportunities, but it is very dangerous as well.

Cryptocurrency Real Life Use Case

One of the most important aspects of a cryptocurrency is its use case. Before we decide to invest in a crypto coin, we should know what is unique about this cryptocurrency. Does it solve a problem? Does it have a real-life use case?
For example, Ethereum’s use case was the unofficial status as the “world computer” for DApps (decentralised applications) and the introduction of the ERC20 standard for crypto tokens.
Bitcoin’s use case was to “bank the unbanked” since it was the first cryptocurrency to come out, the main use case for Polkadot is enabling interoperability between chains, DeFi chains such as Aave, Uniswap, Compound, etc use case is staking, where token holders can stake their tokens and receive rewards.

Polkadot Has A Great Use Case, Connecting Blockchains

NFT (non-fungible token) is another growing use case for cryptocurrencies, especially in the play-to-earn (P2E) section, with tokens such as Shiba Inu coin and Dogecoin. NFT in-game items combine aspects of utility and collectability for players. One of the main use cases for all crypto coins is to be used to shop for goods and services online and on hand in shops. Therefore, we should check with which retailers and service providers the cryptocurrency has partnerships. Although, these are some of the main use cases until now and new real-life use cases will undoubtfully appear in the near future.

Team Behind the Cryptocurrency

Another way to evaluate cryptocurrencies correctly is to see the team behind the project, since the people and their experience make a project work or fail. Is the core team known in the crypto industry? Is this their first project or have they worked on other successful projects before?
Apart from Bitcoin which is a special case, if the team working on the cryptocurrency is not openly disclosed, then that would be a red flag for investors. Do engineers have the necessary experience to build the project or the product that they are advertising? The number of developers and engineers in the project is also important. Ethereum has the largest number of developers, with almost 4,000 of them building DApps and smart contracts, both on the team and as freelancers, which is a reason why Ethereum leads the industry, while other smaller crypto projects might not have enough personnel to carry it out completely but might grow their staff as the project grows. Although this carries a higher degree of risk. Checking the profiles of team members on LinkedIn or other social media profiles is always a safe way to verify their authenticity and check their experience.

Established Coins With Large Market Cap

Market capitalization shows the actual total value of a cryptocurrency while the fully diluted market capitalization shows the potential total value at the current price if all coins were minted. Cryptocurrencies with a higher market cap value are supposed to be a safer investment. Cryptocurrencies with very low market capitalization are usually super new which means that they carry a high-risk level as well. It’s true that cryptos with smaller market cap have a higher potential for growth, which often makes them a good investment potential. But they are also very volatile, while the most established cryptocurrencies with the highest market cap such as Bitcoin and Ethereum are much less volatile during bearish times in particular, which means that you are less likely to get lose your investment in such market conditions. The recent trend of the market cap value is also a good indicator to show how fast a cryptocurrency is increasing.

Bitcoin and Ethereum market dominance stands at 63.74%

Maximum, Total, and Circulating Supply

The circulating supply, the total supply and the maximum supply of coins are important metrics because the amount of coins in the market affects the price of the cryptocurrency. The maximum supply is the number of all the tokens that are meant to be mined/minted or that will ever come into existence, which in some cases might be infinite. The circulating supply refers to the number of tokens that are actually circulating the market. The total supply is the number of tokens that have been mined/issued, which also doesn’t include coins that have been, lost, burned or destroyed. Cryptocurrencies with a small max amount of coins don’t necessarily appreciate in value, but if the difference between the max supply and total supply is not that big, such as in the case of Bitcoin where the max supply is 21 million coins with 19 million in circulation. The smaller the amount of available coins to be mined/minted, the more difficult it becomes and the price of the cryptocurrency moves higher. In a reverse scenario, when many coins are created and enter the circulating supply, it can quickly send the price down.

Liquidity and Trading Volume

Trading volume and liquidity don’t necessarily have much say at the price in the short term, but in the long term, these are very important factors that decide if a cryptocurrency will be successful or not. Liquidity is the acceptance of the token in wider markets, which means how easy it is to exchange this token for cash, other cryptos, or other forms of liquidity. The convenience of buying and selling cryptocurrencies when you want is a major issue, which in long term weighs on the price and the success of the project. We don’t issue crypto trading signals on cryptocurrencies with low liquidity since following signals requires fast execution, which isn’t the case when liquidity is very low. Trading volume, on the other hand, is the amount in value of how much is bought and sold over a period of time which is usually presented on a daily basis. A mid sized project with a low trading volume can show that the project has been abandoned or has a small community to back it up.

Timing and Upcoming Announcements

Cryptocurrency prices are often driven by the sentiment in the crypto market and speculation rather than the right evaluation of the real usability. We have seen some major bullish moves in the entire market over recent years as well as major crashes as the sentiment flip-flops. Therefore, finding the right timing is crucial to being successful in the long run. Technical cryptocurrency analysis is an important tool to find the right timing which we use extensively to analyze crypto markets before opening crypto trading signals. The technical crypto analysis shows us when the market is overbought and oversold which is great for indicating entry and exit points and so, it can impact the return on your investment. There are many crypto announcements for most cryptocurrencies but few have the ability to move them. So, we must remain updated on the latest announcement on various social media channels. In the example below RUNE coin surged more than 400% in a month, after Thorchain announced certain upgrades to their network, which attracted the attention of investors.