For this reason, there are 3 different types of supplies:
- Circulating supply: The amount of cryptocurrencies the project currently has in circulation.
- Total supply): Means the total number of cryptocurrencies that the project currently has established in the blockchain, regardless of whether they are in circulation or not. For example, in the case of Bitcoin ($BTC) the circulation today is approximately 19 million and it is known that there will be 21 million.
- Max supply: It is the approximation of the maximum amount of cryptocurrencies that existed -in the case that it has been taken out of circulation (burned)- or will exist during the useful life of the cryptocurrency.
Taking this differentiation into account, in this article we compile the basic variables that must be observed in the cryptocurrencies in which you want to invest, which are independent of market conditions.
#1. Supply and market capitalization
Understanding the current and future supply of a cryptocurrency is crucial to knowing if it is a good time to invest in a project so as not to fall into the trap of nominality. This means that it is wrong to think that a cryptocurrency is cheap only because its price is 1 cent, when in fact there is a total supply of 100 billion.
Probably a good time to invest in a project is when more than half of the total supply is in circulation., given that the offer in the market will begin to be reduced to the point that it does not have a significant impact on the price. In turn, the diluted market capitalization (total supply per price) is also important, since if it is high at the beginning, it may be simply because most cryptocurrencies are not yet in circulation.
#2 Roadmap
Following the project roadmap is one of the most important issues that an investor must take into account to choose the right time to invest. This is because, unlike stock shares where the issuing companies already present a cash flow, in blockchain projects the tokens are issued during the development of the project and mostly based on future commitments. In this case, a good time to invest would be when important events and/or updates of each project are expected and not when it does not have a future purpose.
#3 Utility
This is a confusing concept for most investors since it is normal to find the concept of “utility” tokens, related to those generally issued to grant rewards to the community, and “governance” tokens that grant the right to vote on project decisions. However, this point refers to what the function of the cryptocurrency in question will be in the future or if it will be applied to solve a specific problem of the community. Namely, as the cryptocurrency has more uses and applications planned, it could be considered a good investment opportunity.
#4 Management and technical team
While in the capital market it is considered an essential element, in the crypto ecosystem the strategic direction and the technical team of a blockchain project is a variable that is often underestimated. For this reason, It should be observed if the human resources of the projects are public, suitable and committed to this, a key factor to achieve a competitive advantage.
Finally, it is relevant to take into account the uniqueness of blockchain projects. This means, what makes it unique among the thousands of projects that exist today. We financial analysts usually say that “If there’s too much of something, that something won’t be worth much.”
Director of CRYPTOCITY.PRESS
Source: Ambito
