2018 was a wild ride for cryptocurrencies. Despite the many ups and downs experienced by Bitcoin and other major cryptocurrency vendors, the market has proven that it is going to stick around for the long haul.
#Here are some tips to get you started on the right track:
- Know the relation between market cap and circulating supply
New cryptocurrency investors may be intimidated by the new vocabulary they need to learn and how these different terms affect pricing. For example, the “market cap” for a particular coin is used to determine the total value of coins on the market. This number is determined by multiplying the coin’s circulating supply by its current price.
The use of the circulating supply, rather than the total supply, is an important distinction. For a variety of reasons, some coins are not available on the public market. Because they aren’t available for trading, they are not counted toward price considerations or the market cap.
- Keep up with current market conditions
You can read articles debating the pros and cons of various cryptocurrencies, but current market data will always be the most reliable source for identifying trends and making smarter trading decisions.
Fortunately, there are several websites dedicated to providing up-to-the-minute updates regarding changes in price, supply and market cap. Coincap, CoinMarketCap, and CryptoCompare are just a few examples of resources that help investors stay up to date on current prices. Data that is updated in real-time is paired with charts tracking changes over 24-hour and seven-day periods to give investors a better idea of current trends.
- Understand which factors influence pricing
What causes cryptocurrency prices to rise and fall? Though supply and demand certainly play a role, crypto investors should carefully consider the perceived utility of a cryptocurrency. If a coin is perceived as having several practical applications, it will be more highly sought-after, and therefore, increase in price.
As MyCryptopedia explains, mining difficulty is another major factor that affects pricing: “A higher mining difficulty means that it is harder to mine an additional unit of a coin. This can have an impact on a coin’s perceived value, and subsequently, its price, as increasing a coin’s supply will require more computing power to be used in the mining process.”
Savvy investors should also pay attention to news headlines regarding different coins and tokens. Positive or negative articles will often have a direct correlation on future pricing trends.