Coinformation Logo
Beta

Start your crypto journey now

Start your crypto journey now

Want to invest in cryptocurrencies but not sure where to start? You've come to the right place.

And even if you are already an experienced investor: you might find the following tips helpful as a regular reminder.

Tip 1: Compare cryptocurrencies with small technology stocks

Cryptocurrencies are used as a digital medium of exchange to settle transactions on the blockchain or to grant the owner of a cryptocurrency access to certain solutions and tools in return.
Cryptocurrencies rely on blockchain technology and have often only recently entered the market. They often have no profit or significant revenue to show for it. However, they have high growth rates in the number of users, owners, as well as transaction volume: pretty much the same is true for young technology stocks, such as Shopify, Upstart or DigitalOcean.
Ask yourself the following question: can you cope with major downward movements in the crypto market in the short term?
What you should know:
  • Technology stocks aren't just similar to cryptocurrencies: They often compete directly and are highly correlated, meaning they make similar upward and downward movements. Likewise, the crypto market itself is highly correlated. For example, when Bitcoin goes up, most other cryptocurrencies also go up
  • Cryptocurrencies have higher volatility, i.e. prices fluctuate more than prices in the stock market
  • With cryptocurrencies, there is a risk of total loss
  • With the greater risk, the potential for return also increases. And while you can only lose -100%, returns of several 100% are not unrealistic.

Tip 2: Choose use cases that you are familiar with

Why is the use case - the actual purpose of cryptocurrencies - so important? Because it can already reveal a lot about the future growth potential of cryptocurrency. First, cryptocurrencies compete with each other because they address the same use cases. Second, cryptocurrencies compete with real-world companies, known as Web 2.0. Third, high growth rates for a use case are essential to a cryptocurrency's growth potential.
Ask yourself the following question: is there a market or use case that you find exciting?
What you should know:
  • Pay attention to whether a cryptocurrency serves a real purpose or can serve a real purpose in the future
  • Make sure use cases have double-digit growth projections per year if possible
  • Start with a use case that is exciting for you, but always invest in several different use cases and cryptocurrencies if possible
Info Logo
Looking for inspiration? Here you can find the use cases with numerous examples

Tip 3: Pay attention to the long-term value. The higher, the better.

Coinformation has developed an approach to evaluate the long-term potential of a cryptocurrency. Several factors go into the evaluation, and we distinguish 6 dimensions: Team, Network, Solution, Technology, Token Economy and Market. While our experts evaluate the fundamental values of a cryptocurrency, quantitative factors are monitored by our artificial intelligence (AI). This gives us a long-term value analysis in real time.
Ask yourself this question: are you okay with short-term price drops in long-term investments?
What you should know:
  • A long-term value covers a period of 3-5 years
  • Short-term developments (e.g. the fall of the cryptocurrency Terra) cannot be predicted by it
  • Not all factors can be checked automatically. For example, we manually update the team's valuation at regular intervals

Tip 4: Blockchain ecosystems play a crucial role for long-term success in the crypto market.

Blockchains are open networks whose value depends to a decisive extent on how active the participants in the network are. The more solutions (decentralized apps or dApps) and users are active in an ecosystem, the more valuable the blockchain or network. Unlike Web 2.0 (e.g., Apple), most blockchains are open ecosystems (e.g., Ethereum). This means multiple blockchains can interact with each other and cryptocurrencies are free to choose their blockchain.
Ask yourself the following question: are there already people in your environment who own or use cryptocurrencies? On which blockchain are these cryptocurrencies based?
What you should know:
  • The more activity on a blockchain, the better
  • A blockchain should be as interoperable as possible, meaning transactions on other blockchains should be possible
  • It is always good, if there are partnerships with larger cryptocurrencies or Web 2.0 companies
Info Logo
More about blockchain ecosystems

Tip 5: Start with small amounts and set a limit.

The same rule applies as in the stock market. Do not invest all at once, but in small steps. Do not invest more than a predetermined amount.
Ask yourself the following question: Can you bear to lose a part of the investment?
What you should know:
  • Invest in 5-8 cryptocurrencies to diversify your portfolio.
  • Divide your investment amount evenly. Initially invest only 5-10% of what you would invest in stocks
  • Don't invest the entire amount at once, but spread your investment in a cryptocurrency over 3-4 purchases
  • Regular investments (e.g. monthly) somewhat compensate for short-term price fluctuations and are good for long-term investments

Tip 6: Find the crypto exchange that suits you.

Investing can be so easy. Unfortunately, it usually isn't. The reason is that many crypto exchanges do not offer a particularly simple buying process. There will be a lot of changes in the next few months and we are working on a solution for our users. Until then, here is an overview to help you choose the right crypto exchange for you.
Ask yourself the following question: do you also want to invest in smaller cryptocurrencies with a higher risk-reward ratio?
What you should know:
  • Choose a crypto exchange you trust
  • Make sure that the cryptocurrencies you are interested in are also offered by the crypto exchange of your choice.

Tip 7: Always invest for the long term. Keep emotions out.

Have you taken all the tips to heart and you are ready to invest? Then read the last tip, the most important and the hardest to implement. Difficult because we often act emotionally when making buying decisions. Emotions are short-term in nature and run counter to our logical, long-term mindset. Almost all successful investors act for the long term. We are not Warren Buffet. But we can and should follow the same strategy.
Ask yourself this question: do I need the money I'm investing in the next few years?
What you should know:
  • Always invest with a time horizon of at least 2-3 years.
  • Stay with this time horizon as long as the long term value does not change significantly.
  • Avoid knee-jerk reactions and take a playful approach to your investment. So invest only what you do not need for the next years
  • Re-evaluate the situation at regular intervals. Try to let profits run and reduce losses
  • Your cash reserve should be as close as possible to 10-15% of the portfolio value to be able to react to opportunities that the (bear) market offers in the short term.
Info Logo
React when something happens

Get Premium

Free access to our Premium features when you subscribe today and for as long as we are in Beta

Coinformation Logo

© 2022 Coinformation

Disclaimer: Cryptocurrency investments carry considerable risk of loss. The value of your investments can go up as well as down. Please do your own research before investing in any cryptocurrency. This service is for informational purposes only and is not financial advice.

About Coinformation:

Coinformation provides information as well as fundamental data analysis of cryptocurrencies. We track prices, financials, on-chain metrics, social interest and many other metrics to identify long-term value and give short term signals in case these change.

ProductsDiscover CryptoPick Portofolio
Learn Crypto
CompanyAbout UsWhy CoinformationWe Are hiringTerms of UsePrivacy PolicyLegal Notice