Crypto investment can be an excellent way for black people to diversify their investments. However, figuring out which cryptocurrency is profitable and which isn’t can be daunting. We’ve put this guide together to help black investors learn how to analyze crypto market trends.
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Examine Crypto Whitepaper
Many cryptocurrency projects provide a whitepaper that explains the technical details and objectives of the crypto. While whitepapers usually contain technical jargon that new investors can’t easily understand, it’s important to read them carefully. You can use Google to look up unfamiliar terms. This will help you learn about different crypto projects.
A detailed whitepaper clearly states the project goal, how their technology will reach those goals, and how the crypto will function. A red flag will be a crypto whitepaper that’s full of unrealistic and generic promises. This information can be helpful when analyzing crypto market trends.
Look at Transaction Value
This metric tells crypto investors the amount of value transacted over a specific period. For example, if there were ten Bitcoin transactions of $200 each, all on the same day, the daily transaction value would be $2,000.
A constant high transaction value shows that the crypto is in steady circulation. On the other hand, if you notice that the transaction value is reducing for a particular coin but increasing for another, it shows that the market is shifting towards that particular crypto.
A good understanding of transaction value is essential when analyzing crypto market trends. You can get guides on Amazon to learn more about how it works.
Market cap, also known as market capitalization, represents a network value. You can calculate it by simply multiplying the current price by the supply of the crypto in circulation. But note that market cap can give misleading valuations if you fail to consider other metrics like liquidity.
In general, market capitalization is used to estimate the growth potential of a crypto. You can get one or two books that explain market capitalization on Amazon if you’re still confused about it.
There are thousands of cryptocurrencies, and sadly, some of them are scam projects built to make the founders rich. Researching the reputation of the team and leadership behind a cryptocurrency can help black investors figure out if a coin is legit or not.
You can learn about the reputation of cryptocurrencies on social media platforms, Reddit forums, and Discord channels. All you need to do is ask for other users’ opinions and experiences about the coin you’re researching. If you get many negative responses about the project or its leadership, then it’s a red flag.
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Check for Trading Volume and Liquidity
This measures how straightforward it is to buy and sell a crypto. A cryptocurrency that can be bought or sold easily without altering its market value so much is considered to have strong liquidity.
Liquid crypto has several buyers’ and sellers’ orders waiting to be filled. This narrows the bid-ask spread. On the other hand, investors will find it difficult to sell crypto at a fair price in illiquid markets. The reason is that there’s hardly any buyer willing to buy.
This will force the trader to lower the price of the coin either or wait for liquidity to increase. However, holding a particular coin for a long time can reduce its return on investment if the liquidity doesn’t increase.
Crypto market trend analysis involves analyzing all the available details of cryptocurrencies. Researching, learning, and understanding will help black investors to determine the cryptocurrency market trend better. You can get cryptocurrency trading guides on Amazon to educate yourself on the subject.
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