7 Factors to Pay Attention to When Picking a Coin to Buy

Coins like BTC and ETH are already too big to grow drastically out of proportion. This ship has already sailed. Surprisingly, BTC did return 155% at one point during 2023 (an amazing bounce-back year for crypto) but when it comes to returns that are in thousands of percent (like BTC did in 2017), you have to find a new coin.

This is easier said than done.

There are so many coins out there, and you’re probably not a crypto expert to begin with. This is why you might need some help figuring out which factors are worth paying attention to. So, here’s a brief list of what you should look out for to pick the right coins to buy in 2024.

1. Team and Development

It’s not incidental that all major fiat currencies belong to the wealthiest economies in the world, as well as the world’s largest superpowers. The only fiat currency that doesn’t fall under this category is the CHF because Switzerland is arguably one of the most stable countries and economies in the world.

In other words, when examining a fiat currency, you’re looking at the powers behind it. When examining a cryptocurrency, you need to focus on the team behind it and the development process as well as any audit certifications that the project might have undergone.

First, you can start by researching individual team members, especially at the very top. In the digital world, it’s pretty easy to track someone’s career. You should focus the most on their previous projects, but keep in mind that some of the most successful people failed a few times before getting it right.

While everything is supposed to be polished on their official website, it’s worth checking it out either way. While you’re at it, you can also check their social media and online presence.

2. ICOs and Presales

The best way to maximize the value of your investment is to find a new coin, like one of those on the best presales list from Techopedia, and be an early adopter. Their value is quite low, and while the majority of them won’t go anywhere, some might give a return in the thousands. Don’t forget that there was a point in time when BTC was $2-3 per coin.

A lot of people don’t understand the difference between ICOs and presales. Both offer tokens at a low price in the early stage of development. The biggest difference is that ICOs are publicly available, while presales are usually offered to a select group of investors. However, this is not the rule, and some presales can be accessed by anyone, as well.

While no one can guarantee that one coin or another will grow in value, some presales show greater promise than others. Always do your research to find the coins that show the most promise.

3. Market Capitalization

A bigger coin has a larger market cap, making it more stable and less susceptible to manipulation or speculation. Overall, cryptocurrencies are a new asset, and they’re volatile by default; however, they’re not all as volatile.

The next thing to understand is that a smaller market (one worth hundreds of thousands and millions instead of hundreds of millions) can be manipulated by a relatively small number of large coin holders. If the entire market is worth a million and you have $500,000 worth of coins, you can do as you please.

With larger markets, the behavior of the coin is more similar to the way fiat markets behave, although it’s not completely the same.

The problem with this is that these smaller coins will never have a huge market capital. This is why keeping your portfolio diverse is so important. Keep some of your funds in these larger cryptos and set aside a part for riskier investments.

4. Check Liquidity

The simplest way to explain liquidity is to ask - how quickly can I convert this asset into cash? With cryptos, this is sometimes much simpler since some cryptocurrencies are used like real money. For instance, a lot of vendors accept BTC, which means that for all intents and purposes, BTC is as liquid as fiat cash.

People are getting their salaries in crypto, cryptos are a massive force in global remittances, and there are so many scenarios in which people prefer crypto over fiat. So, if you’re often doing business with such industries, this should definitely be something you’ll take into consideration.

However, not all cryptocurrencies are BTC. What about buying NFTs? Some NFTs have a strong demand and an active trading community. In that case, just go for it. Still, what if this is not the case? This doesn’t mean that you shouldn’t invest in that particular crypto. It just means that being more careful is advised.

5. Community and Adoption

While this would make sense, the community size won’t always be equivalent to the market cap. Sometimes, you need to take into consideration the fact that the audience will grow the market cap, but this takes time, especially with newer coins. If anything, a bigger audience always means bigger growth potential.

Next, check the platforms where these coins are discussed. Social media presence, online forums and communities, and even their official communication channels are great places for you to start your research.

Not all attention is necessarily good attention. What you’re looking for is the right kind of adventure. Just listen to the conversation and try to figure out the tone. Is optimism overpowering concern? Is this optimism even genuine-sounding, or do a few vigilant marketers just generate it?

6. Purpose and Use Case

All fiat currencies have the same purpose, with the only difference being their value and country of origin. Sure, in some countries, the local exchange office might not have the currency you want or accept the currency you’re trying to trade in, but even this is mostly done via an app nowadays.

This is not the case with cryptocurrencies. Each cryptocurrency has a different purpose and use case; by examining them, you can figure out which has the greatest potential.

The majority are used as digital cash or a store of value. Still, some play a larger role in DeFi or trends like smart contracts. These are especially worth paying attention to.

7. Regulatory compliance 

While cryptos aren’t as regulated as some other assets, this doesn’t mean that there’s no regulation whatsoever.

For instance, one of the biggest concerns that the majority of government agencies have with crypto is the fact that they are used for money laundering. Therefore, AML (anti-money laundering) and KYC (know your customer) procedures are paramount.

Without them, no government will tolerate a coin for long.

All across the globe, there is room for additional regulation being discussed. While China banned cryptocurrencies (first Bitcoin mining, then all cryptos altogether), countries like the US are looking forward to an increased use of crypto, which is why they’re either introducing regulations or laying the framework for future regulations.

Due to the international nature of the cryptocurrencies, the biggest challenge will be determining jurisdictions. This is something that will require international collaboration between regulators.

Key takeaways

While there’s no definitive conclusion as to which cryptos are going to make it, by following these seven factors, you can establish which coins have a potential. Discovering them early enough is the most profitable, but the problem is that the majority of these factors aren’t as visible or transparent too early. Still, the sooner you discover this next “big” coin, the better you’ll do.