Cryptocurrency for Beginners: How to Choose the Right Coin?

Cryptocurrency for Beginners: How to Choose the Right Coin? Factors and tips for beginners to choose the right coin

Cryptocurrency is such a digital asset that works as an alternative payment created using encryption algorithms. They are highly volatile and risky, so it is essential to research before investing is crucial. Choosing the right cryptocurrency for beginners depends on factors like investment goals, risk tolerance, personal preferences, and knowledge level.

Despite the cryptocurrency market downturn, the world of decentralized digital assets is on a rise. Unlike traditional currency, Cryptocurrency operates independently and is decentralized. The top Cryptocurrencies for beginners are those with the highest market capitalization, trading volumes, etc. The three most popular Cryptocurrencies for beginners are Bitcoin, Ethereum, and Binance coin. Other popular ones include Litecoin and Dogecoin. Beginners should do research, know about the market trends and risks that follow, and be cautious. It is also important to follow steps like choosing reliable exchanges, creating an account, buying a preferred cryptocurrency, and storing it securely. These are to be followed before investing and trading cryptocurrencies.

As per reports, the global cryptocurrency market size was valued at US$ 1004.79 million in 2022 and this is expected to reach US$ 2166.85 by 2028. It is gaining massive attention in these recent years with more people investing in these digital assets. To invest in Cryptocurrencies, beginners should consider some factors such as:

1. Market Capitalisation

Beginners are advised to start with Cryptocurrencies that have high market capitalization. Market capitalization is the measure of its overall value. It is calculated by multiplying the number of coins in circulation by the current market value of a single coin. The potential and popularity of Cryptocurrencies can be extracted from market capitalization. The three categories of market capitalization include small-cap, mid-cap, and large-cap. Small-cap are prone to swings and are at high risk. Whereas, mid-cap is more volatile and on the other hand they have better growth potential. Large-cap is the safest cryptocurrency for beginners since they are at lower risk.

2. Past Price Action and Gains

Another way of choosing a cryptocurrency for beginners is by analyzing the price performance of the coins in the past. The best coins can be chosen by looking at the coins that achieved the highest gains over a period. The downturn of the method is that past performance does not guarantee future returns. But this method can be dependent on short-term cryptocurrency trading. Price action trading evaluates future prices using statistics and historical data.

3. Use Case

The use case can be used as a criterion for choosing the right coin. Beginners need to invest in cryptocurrencies that have a clear use case and strong demand for their services. Mostly, businesses and individuals adopt these coins which lead to increased value over time.

4. Liquidity

Some cryptocurrencies can be bought and sold easily. Cryptocurrencies with high liquidity can be easily traded on exchanges and due to large buy or sell orders, their price fluctuates drastically. Therefore, beginners should choose cryptocurrencies with high liquidity to ensure that they can buy or sell coins without incurring large price slippage.

5. Analyst Views

Analyst viewers are generally emerging crypto influencers and Youtubers who create content in various content like best cryptocurrency for beginners. How to invest and so on. People wishing to invest in crypto look up to these analysts for choosing the right coins to invest in or trade in. The disadvantage of this method is that the analyst's prediction can go wrong and it is always advised to conduct your research before investing or trading.

6. Market Niche

From DeFi to Metaverse, Cryptocurrencies have different niches. Beginners should explore the sub-sectors of the market and should decide whether the coin has the potential to grow. DeFi coins are built on blockchain and the top 5 DeFi coins by market capitalization are Uniswap, Chainlink, DAI, Maker, and Aave. Metaverse coins are used in online games which have real asset value. Some popular coins are Decentraland, Apecoin, and Internet Computer. Non-Fungible tokens are linked to the Ethereum blockchain and cannot be exchanged in trades like other Mr crypto assets. Ownership of an NFT Is often associated with a license to use such a linked digital asset but generally does not confer the copyright to the buyer. Stable coins' value is fixed to reserved assets to reduce coins' volatility and provide an alternative to a stable currency. The biggest stablecoins are USD coins, Tether, Binance USD, etc.

7. Security

Security is an important factor to be considered when choosing cryptocurrencies. Cryptocurrencies as discussed are highly volatile as they work independently without any government backing. Therefore, they are vulnerable to hacking and other risks. Beginners should choose coins with strong security features like encryption, multi-factor authentication, and cold storage.