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Making money from crytocurrency: How to Start Using Bitcoin Price

Making money from crytocurrency: How to Start Using Bitcoin Price

Although making money from bitcoins, bitcoin cash, lite coin, doge coin and other crytocurrencies requires specific knowledge. It an easy thing to do. Making money from crytocurrencies involves more “not to do” than “to do”.

This guide will address the most important one. Contrary to the title, it is actually about not trading crytos using their price.

How To Determine The Value of a crytocurrency

​Cryptocurrency is a new revolutionary type of currency. Like any other currency, they only have value because people think it has value. While some currencies are backed by gold or other precious metals; others are backed by nothing but hot air although have value because people think it has value and use it as a unit of exchange. Listed below are some factors that determines the value/price of a crytocurrency.

Limited Supply and supply/demand.

Making money from crytocurrency: How to Start Using Bitcoin Price

First of all, precious metals gain their value/perceived value due to their utility and limited supply, and price is often tied to supply/demand. Supply/Demand is a simple economic factor that affects the price of many things. Bitcoin for example, has a maximum of 21 million whole units, divisible 100 million times. With over 7 billion people on the planet, if even 1 billion were to adopt Bitcoin, 21 million whole units would not spread very far without a significant price tag. The utility of the currency, and how easy it is to use and store is a key determinate of its value.

Perceptions on its value by the public.

Making money from crytocurrency: How to Start Using Bitcoin Price

The public perception of a cryptocurrency has a big bearing on the value of the currency. In the case of Bitcoin, a driving factor can be people reacting positively to the innovations and the fact it is a thorn in the side of the mostly corrupt banking sector.

Media.

Making money from crytocurrency: How to Start Using Bitcoin Price

Especially relelvant is the media, the media reporting on Bitcoin in either a positive, or negative way can have an influence on the public perceptions of Bitcoin, and can influence the price.

Investors

Making money from crytocurrency: How to Start Using Bitcoin Price

Finally, all Cryptocurrencies, especially smaller less known ones, investors can manipulate / inadvertently affect their price in the following ways: With a large amount of capital at their disposal, can buy a large percentage of the coin supply, then attempt to promote good stuff about the coin to ‘pump’ the price.

Why You Should Not Depend On Price Alone

Looking at some of the list of factors that determine the price of bitcoins. It is obvious that price will  always vary and will only depict a biased value of what a cryto is really worth. It will be unwise to invest in a crytocurrency based on price alone.

why marketcap is more reliable

While some people recommend looking at market cap, history as shown that sudden and wide margin of flunctuation can occur in the market cap of a cryto: ie go to forbes to get example.
So I compiled some reliable sources of information that you should look at before making investment or trading in any crytocurrency. This sources when combined offer more reliable information than price alone.

sources of info

1) Coin’s White Paper

Making money from crytocurrency: How to Start Using Bitcoin Price

A detailed proposal by the development team which outlines the purpose and mechanics of the coin. This represents the main source of evaluating the fundamentals of the coin. You should always read the coin’s white paper before investing.

2) Coin’s Slack Channel or Blog

Making money from crytocurrency: How to Start Using Bitcoin Price Making money from crytocurrency: How to Start Using Bitcoin Price

This represents the official and main channel of communication of the core development team. Join their slack channel and view the interaction of the development team with the community. Ask questions to get more information on the coin. You should also follow the updates given by the developers in their official blog. Here you can get a wide list of crytos and their blogs.

3) Community Forums: Reddit/Steemit /Bitcointalk

Forums are a great way to understand the coins better, as well as the sentiments surrounding the coin. You can definitely find  easy-to-understand analysis of any coins from forums, as the community is well-informed. The diversity of thoughts allows you to grasp the mechanics of the coin far better, especially if you’re not technically-inclined. Furthermore, if you’re not familiar with the technical jargon, a good tip is searching for your query together with the term “ELI5”, which stands for “Explain it to me like I’m 5 years old”.

Other things you should consider

In addition to the list above:

  • What is the Supply Structure of the Coin?
  • How Many Coins Will There Ever Be?(Having a finite coin supply would make the coin a stronger store of value)
  • What is the Market Capitalization of the Coin? (Market cap is a measure of the Coin’s valuation)
  • Is There a Hard Cap on the Coin?
  • What will be the Allocation of Coins to the Founders and is there a Lock-up Period? (A high percentage of Coins given to the founding team is not a healthy indicator)
  • Is the Coin Based on an MLM Structure or a Ponzi Scheme? (Stay away from MLM-based coins. Cryptocurrencies should be backed by Blockchain technology, not an MLM structure.
  • Is There Scam Warnings Relating to the Coin?

In conclusion, always remember your best quality as an investor is discipline. Never buy or sell on emotion. That’s for amateurs and in a volatile class of asset like crytocurrency you cannot survive without discipline.