How To Evaluate Investment Returns In Cryptocurrency

How to evaluate investment return to cryptocurrency

The cryptocurrency world has exploded over the last decade, starting with new coins and chips every day. While many investors have come to the market with high hopes and expectations due to returns, reality is often much more complicated. With so much uncertainty and volatility associated with investing in cryptocurrency, it can be difficult to distinguish between a signal from noise and make reasonable decisions on investment.

In this article, we will examine how to evaluate the return of cryptocurrency investment and provide you with a detailed guide to help you surf the market.

Cryptocurrency Investment Understanding

Before immersing the evaluation methods, let’s first understand what cryptocurrency investing is. Cryptocurrencies are digital or virtual currencies that use cryptography for security and decentralized control. They operate regardless of central banks and governments, allowing consumers to send, accept and trade directly without the need for intermediaries.

Investing in cryptocurrencies can be done through various platforms, including the exchange accounts and separate cash programs. Each platform has its own rules, taxes and requirements related to the purchase, sale and storage of cryptocurrencies.

Return of Investment: Step by Step

To evaluate the return of cryptocurrency investment, follow the following steps:

• Define your investment goals : Before investing in cryptocurrency, it is necessary to define your investment goals. Are you looking for short -term profit or long -term growth? Do you want to diversify your portfolio or focus on a particular asset class?

2.

* Blockchain technology : understand how it works and the main infrastructure.

* Development team and advisers

: Check that the development team is experienced, reliable and transparent about their goals.

* Market capitalization : Compare the capitalization of different cryptocurrency market to understand the market scale.

• Evaluate technical indicators : Technical indicators can provide valuable insights on cryptocurrency price movement models, trends and volatility. Some popular technical indicators include:

* Average movement : average prices over a period of time (eg 50 days, 200 days).

* Relative Strength Index (RSI) : Measured price movement speed and change.

* Bollinger bands : consists of two standard deviations and sliding mean.

• Analyze market moods

  : The market mood can show investors’ confidence in cryptocurrency value. Analyze:

* Trendlines : Land lines showing potential purchase or sale signals.

* Support and resistance level : Set areas where prices tend to jump or break.

• Evaluate liquidity and trade volume : Liquidity measures the ease of currency purchase and sale, while the volume of trade shows market activities. Look for:

* High liquidity : low standard deviation and large volume of trade can mean higher stability.

* Trade volume growth : Increased trading volume can mean growth interest in cryptocurrency.

• Evaluate risk tolerance by evaluating:

* volatility : Understand how much you want to lose or get used in every trade.

* Fear and greed factors : Knowing about emotional bias that can lead to investment solutions.

• Consider alternative metrics : In addition to financial metrics, consider alternative methods of evaluation of cryptocurrency returns such as:

* Network Effects : Evaluate the value of the cryptocurrency based on its network size and user growth.