How to Choose Crypto Assets for Investment
Investing in crypto assets can be daunting and confusing for beginner investors. Currently,
Pintu offers hundreds of crypto assets with different functions. Beyond that, there are
thousands of other crypto assets, and not all of them have a promising future. This situation is
exacerbated by bear market conditions, which make price fluctuations more dramatic.
Therefore, you need to have your own knowledge and system for selecting and evaluating an
asset. This article will delve deeper into how to choose crypto assets and what you need to
pay attention to.
Article Summary
🧺 Crypto assets can be categorized into two types: Bitcoin and altcoins. Bitcoin is the
safest and most stable crypto investment asset. Meanwhile, altcoins carry higher risks
with higher potential returns.
In choosing crypto assets for investment, you need to evaluate the fundamental value
of the asset and its role in the crypto market.
🧠 You can use several criteria to evaluate the value of a crypto project: clear utility,
tokenomics, team activity, number of users, and competition.
📊 After evaluating the fundamental value of the asset, you need to consider metrics
related to the crypto market and its price movements.
How to Choose Crypto Assets for Investment
If you’ve reached this point, it means you want to invest in crypto assets. Before we look at
the criteria for choosing crypto assets for investment, we need to understand the basic
concepts of altcoins and Bitcoin. In the crypto industry, there are two asset categories:
Bitcoin and altcoins. Bitcoin is the largest and most expensive crypto asset currently.
Meanwhile, altcoin is a term for all other crypto assets besides Bitcoin.
Basically, Bitcoin is considered the "safest" asset for investment in the crypto industry. As a
pioneer in the crypto industry, Bitcoin has a loyal community and tokenomics or token
economic model that maintains its supply and demand.
After Bitcoin, Ethereum is the largest altcoin, occupying the 2nd position. Ethereum is the
first altcoin to have smart contract technology and successfully gave birth to new industries
such as DeFi and NFT. BTC and ETH are giants in the crypto industry, having the lowest
fluctuations compared to other crypto assets.
When choosing crypto assets beyond BTC and ETH, there are several criteria you can use to
evaluate them. This is done to evaluate whether the fundamental value of the asset matches
its market value. As the name suggests, this is commonly called fundamental analysis. We
also need to look at the metrics of an asset such as market capitalization and trading volume.
Finally, we must consider market conditions before buying the asset.
We will divide these three aspects into several sections below.
1. Evaluating Several Criteria of a Crypto Asset
Clear Utility
The first thing you need to find out when you want to invest in a crypto asset is its utility.
You need to know what the blockchain utility of a crypto project is, including the function of
its token and how its technology benefits users. A crypto project that has great technology but
lacks clear utility will ultimately struggle to attract users. On the other hand, some crypto
projects have clear goals and utility, but their tokens have very limited uses.
So, ideally, a crypto asset meets two criteria:
1. Its platform or blockchain has clear utility and goals.
2. Its token has broad uses within the project's platform.
Ethereum is one example of a crypto asset that meets these two utility criteria.
You can read the white paper of a crypto project if you want to understand it more deeply.
This is part of the fundamental analysis of a crypto asset.
Tokenomics
Token economics or tokenomics relates to the quantity, function, and distribution of a crypto
project’s tokens. Tokenomics regulates the allocation of tokens at the beginning of a project
launch and their distribution afterward. Besides that, an often-overlooked aspect of
tokenomics is how the tokens benefit their holders or value capture. However, before delving
into that, the basic thing you need to know about a crypto asset's tokenomics is the maximum
supply, circulating supply, token growth (token inflation), and token distribution schedule
(vesting schedule).
A good crypto asset ideally has a high maximum supply and circulating supply. Additionally,
it has low token inflation and has passed the token distribution schedule, so there is no high
selling pressure from locked tokens.
The two assets that meet all these criteria are Bitcoin and Ethereum. Beyond these, you need
to find out this information before investing in a crypto asset. You can use Coinmarketcap or
Coingecko to find basic information about tokenomics.
How Active Is the Project?
One sign of a good crypto project is its always up-to-date activity. Large crypto projects like
Solana, Ethereum, and Cardano always strive to provide information to their users through
social media, blogs, or websites. Besides that, the social media activity of their user
communities is also very lively, and they actively contribute to attracting other users to their
respective ecosystems.
Here are some indicators of a crypto asset's activity that you can look at:
Developer activity: Developer activity can be used as a benchmark to evaluate the
crypto projects that attract the most builders to their ecosystem. You can use
Gokustats by Artemis to see important statistics like daily transactions and developer
activity.
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Social media activity: Crypto projects with active communities have active official
social media accounts, and you can also check what people are talking about
regarding the project. You can use Lunar Crush to see various social statistics from
many crypto projects.
Frequency of website updates: Most large crypto sites like Ethereum always provide
the latest information about their projects through blog posts or social media.
Number of Users and Daily Activity
The number of users is also a criterion of a crypto project that is often overlooked.
Nowadays, many experienced investors start to look at this data as an important metric to see
the sustainability of a crypto project. User activity and numbers become more important in a
bear market to see if a crypto project can retain its users.
In crypto, the number and activity of users can be seen through unique addresses, unique
active wallets, and unique transactions. The images below show user activity on several large
blockchains like Ethereum and BNB Chain. Several sites you can use to find the above data
are Gokustats by Artemis and Dune Analytics (a forum for data). Avoid investing in
blockchains and crypto projects with minimal user activity.
Considering Competition
When evaluating a crypto project, we can also compare it with other projects in the same
sector. For example, you can compare Cardano with other proof-of-stake mechanism
blockchains to understand Cardano's position and role compared to assets like Solana or
Cosmos. Analyzing a crypto project without comparing it with its competitors can make you
fail to see its shortcomings.
Besides, some sectors in the crypto industry already have dominant market leaders. Ethereum
and OpenSea are examples of market leaders in their respective sectors, namely the layer-1
platform and the NFT market.
2. Paying Attention to Crypto Asset Metrics
Market Capitalization
Market capitalization or market cap is a metric to see the market value of a crypto asset. It is
calculated by multiplying the number of tokens in circulation by the price. Market cap
provides a more accurate picture of an asset’s value than its price. Moreover, market cap is
also related to the price fluctuations of an asset because assets with large market caps are
usually more stable than others.
In the crypto market, we can distinguish between three market cap categories: large cap, mid
cap, and low cap. You can read the market cap article to learn more about this. The image
below can give you a general idea of the relationship between market cap and investment
strategy.
Liquidity and Trading Volume
Trading volume and liquidity are important metrics to consider when investing in altcoins.
These two metrics determine price fluctuations and the price you get when selling or buying
assets. In major assets like BTC, these factors are not too important because Bitcoin almost
always has high liquidity and trading volume. However, in smaller altcoins, these factors are
very influential.
Liquidity is closely related to trading volume. Both regulate price fluctuations and the ease of
selling or buying an asset. The lower the liquidity and trading volume, the harder it is to sell
or buy an asset. Assets with low liquidity and trading volume are also very prone to price
fluctuations. Low trading volume usually indicates that investor interest in the asset is low.
Assets with low liquidity and trading volume carry higher risks.
3. Determining the Right Time to Buy Crypto Assets
The question of when to buy assets is one of the most difficult questions to answer. Even
experienced investors often make mistakes in buying assets and suffer losses. There is no
100% accurate guide in choosing the right crypto assets or trading them. However, you can
use some of the following points as general guidelines before buying an asset.
Observing Price Movement Trends
Before you consider buying a crypto asset, observe the price trend over the past few weeks. Is
it going down? Tending to go up? Or is it stagnant? And what might be influencing the price
movement? There are three common price trends that an asset can experience: uptrend,
downtrend, and sideways. Buying an asset undergoing a long-term correction carries a higher
risk unless you want to do DCA or buy the dip. However, you can also find strong assets
based on these price movements.
Want to understand how to read crypto asset price charts? You can check out the trading
article collection to understand how to read price charts and perform technical analysis.
However, you also need to consider the overall market conditions. Is the crypto market in a
bear or bull market? There is a high risk of buying altcoins in a bear market.
Understanding Market Conditions
In the crypto market, the difference in price movements in a bear and bull market is like day
and night. In a bull market, an asset can experience price rallies reaching thousands of
percent. However, those price increases can disappear in an instant during a bear market. This
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is especially true for the majority of altcoins, which will experience corrections of more than
60%. BTC, ETH, and stablecoin assets usually become the choice of many experienced
investors in a bear market.
Even so, there are always altcoins that show strength in a bear market. You need to look at
which altcoins are not in a downtrend or have just reversed their trend even though the
situation is bad.
Starting Small
Finally, you need to consider risk management before starting to buy crypto assets. An
important adage often mentioned by experienced investors is "Only invest what you can
afford to lose," which means investing only money you can part with. Beginners often make
the mistake of losing 100% of their money, which should be used for daily needs or more
important necessities.
If you are just starting to invest, read the articles "Understanding 5 Basic Investment
Principles" and "8 Things to Consider Before Investing in Crypto Assets" so you are prepared
to invest in crypto assets.
How to Buy Crypto Assets
You can start investing in crypto asset tokens by purchasing them on the Pintu app. Here’s
how to buy crypto on the Pintu app:
1. Create a Pintu account and follow the identity verification process to start trading.
2. On the homepage, click the deposit button and fund your Pintu account using your
preferred payment method.
3. Open the market page and find your favorite coin.
4. Click buy and enter the desired amount.
5. Now you own crypto assets!
Additionally, the Pintu app is compatible with various popular digital wallets like Metamask
to facilitate your transactions. Download the Pintu cryptocurrency app on Play Store and App
Store! Your security is guaranteed as Pintu is regulated and supervised by Bappebti and
Kominfo.
You can also learn more about crypto through various Pintu Academy articles updated
weekly! All Pintu Academy articles are created for educational and knowledge purposes, not
as financial advice.
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References
Alex Gailey, How to Evaluate Any Cryptocurrency: A Guide for Investors |
NextAdvisor, The Time, accessed on November 8, 2022.
How to Assess Crypto Projects & Altcoins, Andryo, accessed on November 8, 2022.
Emma Newbery, Your 7-Point Checklist to Crypto Research, Fool, accessed on
November 9, 2022.
What is Tokenomics? A beginner’s guide on supply and demand of cryptocurrencies,
Coin Telegraph, accessed on November 10, 2022.
Hasan Furkan Gök, Crypto Investing: The Complete Guide (2022), Nansen, accessed
on November 11, 2022.
7 Key Ways to Evaluate a Cryptocurrency Before Buying It, Coin Desk, accessed on
November 14, 2022.
