Investment in cryptocurrency is still a global phenomenon. In Indonesia, transactions surged up to 370 trillion rupiahs in May this year, according to the Ministry of Trade.
However, the traded value of crypto assets was only Rp 65 trillion at the end of last year.
This figure is still small compared to the global cryptocurrency market. According to CoinMarketCap data, the volume of crypto market trading in the last 24 hours has reached 77.70 billion US dollars or around 1,133.09 trillion rupiahs (exchange rate of 14,583 rupiahs against the US dollar).
Currently, the cryptocurrency space is still dominated by Bitcoin. Coinmarketcap data itself shows that this giant crypto asset holds between 45% and 50% of the crypto market share.
Outside of that, the cryptocurrency market capitalization still consists of hundreds or even thousands of altcoins.
Investing in altcoins can be an option for novice crypto traders. It is understandable since the high price of Bitcoin can be a barrier to participation.
Choosing an altcoin to trade may seem complicated because there are so many. In fact, if you choose the wrong altcoin, you may be scammed or defrauded.
So, if the number of altcoins is so vast, how can you choose the right one? To avoid mistakes, let's first look at how to choose the right altcoin so that your investment is based on evidence, not just following the trend.
How to Choose the Right Altcoin for Investment
Research Before You Buy
With so many altcoins available for reference, it is crucial to do your research before investing. Start by understanding the factors that influence the performance of altcoins, such as the technology behind them, the provider, and the daily trading volume.
Additionally, you should also examine the historical price chart of the coin, its performance, price dynamics, and its history. Don't forget to check the market capitalization and the circulating supply of the coin in transactions.
For example, you can begin with a cryptocurrency with the largest market share. Why? Because market capitalization reflects the popularity of the cryptocurrency. This may indicate that many users are seeking to invest in the cryptocurrency.
Furthermore, you should avoid altcoins that have seen a significant decrease in their market capitalization, if possible. This indicates that the market demand has decreased, which may be caused by a lack of confidence in the token's use case by market players.
View Installed Technology
When selecting altcoins for long-term investment, it is essential to consider the underlying technology. Many altcoins rely on blockchain systems that simply mimic the technology already present in Bitcoin. Therefore, it is wise to choose a source of technology that brings something new to the table.
One example of such a technology is Ethereum (ETH), which introduced smart contracts and became the second-largest cryptocurrency by market capitalization. Many developers also use Ethereum to build decentralized financial applications.
Another altcoin that is currently popular among investors is Cardano (ADA). This cryptocurrency utilizes a proof-of-stake consensus algorithm and is known for being environmentally friendly.
In choosing altcoins, investors should focus on the cryptocurrency's inherent value and potential for growth in the financial world.
Check Daily Transaction Volume
Analyzing the daily transaction volume is crucial when considering investing in altcoins. The higher the daily trading volume, the higher the market demand for that particular altcoin. You can easily check the volume on websites like CoinMarketCap or CoinDesk.
However, don't solely rely on the popularity of the altcoin, as there are many lesser-known coins with better growth potential than larger coins.
High and low trading volumes also indicate the liquidity of the altcoin. If the volume is very low, then there are very few buyers and sellers, which may lead to difficulties when buying or selling the altcoin.
Be aware of what happens during ICO
Initial coin offerings (ICOs) can be a good reference to gauge the potential of a coin's success. High demand during an ICO can signal a good trading option.
However, be sure to research the development team behind the coin. A team with a good track record in the crypto world may indicate a promising future for the new coin.
Take Cardano and Polkadot, for example. Both coins were developed by individuals who worked on Ethereum. Now, look at their performance in the market.
It's important to approach ICOs with caution and to thoroughly examine the coin's potential before investing. By doing your due diligence, you can make informed decisions and avoid potential scams.
Exploring Underrated Cryptocurrencies
Despite the abundance of information available, it can be difficult to discover which cryptocurrency is right for you, as much of the information out there only covers popular coins.
To tackle this issue, you can examine the movement of lesser-known altcoins on major exchanges. However, it's also crucial to choose your trading exchange carefully to ensure a safe and credible market.
Diversify Your Crypto Portfolio for Better Risk Management
Choosing the right altcoin to invest in can be overwhelming. But you can identify your favorite cryptocurrencies by investing in two or more altcoins. This way, you can decide which crypto assets fit your preference.
Investing in multiple crypto assets also allows you to practice diversification. As you may know, diversifying crypto assets has many benefits, especially when the market is bearish.
Investing in any instrument is always risky. The same goes for crypto assets, so diversify your risks by buying more than one altcoin.