Cryptocurrency trading spiked to record highs amidst the pandemic. Research shows that growth rates show no sign of slowing and cryptocurrencies are gaining interest in mainstream media. Understandably, many are now looking at getting into crypto.
Notably, however, within this upcoming wave of market newbies, only 30% characterize themselves as being “very financially literate.” This brings cause for concern as it stands in contrast to the 54% of current crypto holders that say the same.
With that in mind, although getting into crypto can be profitable, it is important that enthusiasts conduct research before going on their crypto journey. At PumaPay, we try to encourage this by updating our blog regularly to provide our crypto community with the information they need to understand the market.
In this article, we will delve deeper and focus on 3 important things to consider before getting into crypto.
1. Market Capitalisation
Before getting into crypto, one must understand market basics. Similar to traditional stock investors, crypto users can estimate the value of their desired cryptocurrency by calculating market capitalization. This is done with the following equation:
Market capitalization = Total coin supply x Price of coin
CoinMarketCap lists cryptocurrencies by decreasing market capitalization. When choosing what cryptocurrencies to buy, you can categorize market capitals as large and small.
Typically, investments in coins with large market capitals are characterized as conservative. This is because their size indicates limited potential for growth and low returns. Conversely, cryptocurrencies with small market capital have a large growth potential and the possibility of creating high returns. The downside to such investments is that the projects are usually still fairly new. Therefore, although they might bring a high return on investment, they are still high risk.
2. Trading Volume
Like market capitalization, trading volume is another performance metric used to assess the value of a cryptocurrency. In a nutshell, it refers to the total amount of coins traded over a 24-hour period.
Before you go and look at trading volumes, there are a few points to consider. Firstly, values differ between exchanges that charge fees for transactions. This behavior emulates high volume trading by allowing traders/bots to send crypto back and forth free of charge.
Secondly, volume acts as a loose intimation for how sustainable an investment may be. For example, an investment in a coin with a rising price and low volume, although appears attractive, may turn out to be fruitless. Unfortunately for crypto users, cryptocurrencies are a world away from your average securities and regardless of the research one does, the uncertainty and volatility of the market will always be present.
Lastly, getting into crypto is futile if you do not have a safe, secure medium to store your assets. Luckily for users new to the market, there are quite a few apps out there that allow you to download a wallet directly to your mobile. If you are serious about getting into crypto, you can try the PumaPay mobile wallet for free, available on iOs and Android. A standout application, we offer our users a solution with maximum utility; you can do virtually anything from buy crypto directly in the app with a card to exchange and even make payments to your favorite online merchants!
Before you get started, the most important thing to remember is…
The crypto market is an uncertain, volatile place but the potential for rewards is immense. As a market newbie, one must be mindful that there will most likely always be a risk. Further, performance metrics like market capitalisation, trading volume and price- are only an indication, not an insurance, that the decision you make may be valuable. Remember to do your research, keep your assets safe and be mindful!
PLEASE NOTE: The content above references an opinion and is solely for information purposes. It is not intended to be investment/financial advice.