How to judge whether cryptocurrency has investment value? What is the biggest factor affecting the price of cryptocurrency?
With the boom of blockchain, crypto virtual currency is attracting more and more people's attention. However, in response to the emerging new "currencies", it is difficult for us to judge their investment value, and even face a great risk of fraud. Now let's see how to judge whether a cryptocurrency is worth investing and what is the biggest factor affecting the price of cryptocurrency.
How to judge whether a cryptocurrency has investment value?
1. Key Performance Indicators
Similar to the traditional market, the encryption market can also use the following key performance indicators: market transaction volume, strategic partnership, roadmap, profitability, profitability method, project preparation status, number of unique users, number of application platforms, etc. In addition, there are also financial statements of the project and new laws and regulations of various countries that may affect the encryption project, which are important reference indicators.
2. Sustainability, management, use function
There is a view in the current encryption field that all cryptographic systems will eventually be summarized as the integration of technical and mathematical breakthroughs, and the main reason why most cryptocurrency projects are not feasible in the long term is that there is no priority to sustainability. Before investing, it is necessary to know whether you are participating in long-term investment or short-term speculation, and whether the project has long-term sustainability.
In addition to sustainability, there are also project management challenges. For example, who is behind the project? How is the team? Is this a legitimate project with an achievable idea? To what extent has the project roadmap been completed so far, and what are the plans for the next step? To some extent, such evaluation methods are similar to those of individual stocks. The biggest difference is that the tokens of some encryption projects have the use function, which can serve the development of the project or obtain empowerment.
3. Other levels
It is undeniable that most cryptocurrency buyers and sellers are speculating at present, which means they are just querying the price trend chart and guessing that it may rise or fall with the technical analysis. On the other hand, there are also fundamental investors who try to find the intrinsic value of a project using the bottom-up approach. Based on the use of exchange cash flow analysis or similar valuation methods, this is possible for anything that generates cash flows (such as companies or bonds). However, when something cannot generate cash flow, such as commodities, it will become more complicated. It is very difficult to propose a reasonable forward-looking valuation of a given cryptocurrency for the following reasons:
First of all, master the number and growth rate of departments on the cryptocurrency. Cryptocurrency is absolutely auditable, and the account book of the project is open all day. Token economics and its team share opening can be checked. However, the specific capital inflow and wallet address ownership are very complicated.
Secondly, it is very difficult to assess how many economic behaviors or value deposits will take place in blockchain cryptocurrencies in the next 5-10 years. Even Bitcoin and Ethereum are almost impossible to predict accurately. For newer projects, it is almost useless to try to estimate their economic behavior. To some extent, this indicator can only be roughly guessed.
Finally, it is also a difficult problem to estimate how the given cryptocurrency will change or maintain its market share. So far, the only thing that remains unchanged is that Bitcoin has been ranked No. 1 since its inception. In addition, the cryptocurrency market is a never-ending slaughter, and every time the Bull and Bear convert the top 100 list of market capitalization, there will be earth shaking changes.
What is the biggest determinant of cryptocurrency prices?
The relationship between supply and demand is the most important determinant of cryptocurrency.
This is a basic economic principle. If the supply of a cryptocurrency is extremely high and the demand of traders and customers is extremely low, the value of the currency will decline. On the contrary, if the supply of a cryptocurrency is limited and the demand is high, the value of the currency will rise.
This is related to the rare factors that promote the price rise, and it is one of the factors that make the price of Bitcoin rise to the highest level. The supply limit of Bitcoin is 21 million, which is very low compared with other currencies. However, its demand has soared in recent years.
Media or public mentality also has a great impact on the price of cryptocurrency. If a currency or platform has negative public information, the currency price will generally fall. However, if this kind of currency gets high-profile support and positive media reports, the price will almost certainly increase. This means that the price is seriously damaged by everyone's emotions and hype.
Other factors that have a significant impact on the price include the use of money, that is, the availability of money, and the underlying blockchain platform for dealing with real problems. At the same time, the workload proof (PoW) mining difficulty will also affect the value of money, that is, higher mining difficulty means it is difficult to improve the supply of money, thus generating upward pressure on prices when the demand is high.
Speaking of this, I believe you have a certain understanding of how to judge whether a cryptocurrency is worth investing and the biggest factors that affect the price of cryptocurrencies. In general, I remind all investors here that there are still great variables in the cryptocurrency market, and investment is accompanied by certain risks, so you should be cautious.