5 Indicators to Consider When Making Long-Term Crypto Investment Decisions

March 15, 2021 Heath Muchena

Wondering whether you should buy bitcoin or whether to keep the digital asset in your portfolio short or long term? Well, regardless of the position you decide to take, it’s best to get some direction using technical analysis and fundamental analysis tools.

Cryptocurrency trading indicators work, if not exactly, but almost in the same way as traditional tradable asset indicators. Whether you want to trade crypto, forex, stocks or even other assets or commodities, you should get some direction from these indicators before investing.

Without technical analysis and proper study of the fundamentals, you will be trading out of ignorance and wishful thinking. And that’s not something anyone wants to do with their hard earned money. The crypto market is highly volatile, with many unpredictable outcomes due to different variables.

In today’s post, we will show you some of the most important and top five indicators to check before choosing a long-term position.

Find out how to perform Technical analysis as a beginner.

Market Cap Simply put, market cap is the metric used to measure the relative size of a cryptocurrency. It is calculated by multiplying the current price of a specific coin or token by the total number of the same coin in circulation.

At the time of writing this article, the crypto market share is over 1 trillion US dollars. With Bitcoin at a dominating figure of just over $1 trillion, Ethereum at around $200 billion, and over $50 billion shared among other cryptocurrencies.

What you need to understand is that the greater the market capitalization volume, the less the volatility. What this means is a large market cap shows dominance, which is a good indicator for choosing a long position. Take Bitcoin for example with a market cap of $1 trillion, which is more than 70% of the entire crypto market size. This suggests that one can buy bitcoin as a long-term investment.

However, as a long-term investor, you will want to avoid projects with a very small or low market capitalization volume. This is because cryptocurrencies with low market capitalization can be subject to pump and dump schemes, and can result in you losing your hard-earned money. You should target projects with, for example, a market share of at least $10 billion dollars. Based on market cap share, one can choose Ethereum in one’s portfolio for a long position.

Utility and user base

Before choosing a long position, one of the other things or indicators you want to check is the utility of any particular cryptocurrency. You should examine the usability of cryptocurrency, and the robustness of the community that supports it. A good project must have a strong community.

Ethereum is the second largest cryptocurrency by market cap and has a solid community and use case. It allows smart contracts and developers to build decentralized applications (dApps) on its blockchain.

Another good example of a cryptocurrency with good utility and a decent sized community is Cardano. Cardano has been called the “third generation” blockchains after Bitcoin and Ethereum. It was created to solve scalability, interoperability and sustainability.

Litecoin, Binance coin (BNB) are also good examples of cryptocurrencies that have good use cases and active communities. You can buy these crypto-assets on Remitano P2P exchanges for long-term investment.

Future and ongoing projects

It should be a no-brainer, right? Well, not an easy indicator to look out for. Before choosing a long position, you want to know the underlying technology that drives the cryptocurrency.

The future of the coins listed above is bright and strong. Why? These cryptocurrencies have strong developers and communities. Bugs are fixed regularly, contributors and more people join the projects. The more contributors, developers and people join the project, the more valuable it becomes.

Ongoing research to complement the blockchain technologies that power cryptocurrency projects and support the ongoing development is crucial. For example, Ethereum is moving from its proof-of-work (PoW) to a proof-of-play consensus mechanism with Ethereum 2.0. This will improve scalability and speed of the network.

The new EIP 1559 is going to solve the long-standing problem of high Ethereum network gas fees and also improve the user experience. Projects and developments like these have likely played a significant role in the recent rise in Ethereum’s price.

The crypto world is an exciting one, which is why positive and exciting developments often lead to adoption. So, before you choose a long position, you want to have all these boxes ticked and ticked.

Volume and transaction

Trading volume is the number and value of trades of a particular coin at a particular time. For example, if Tom sells 2 BTC at a rate of 20K USD for each, then the volume of the transaction is simply 40K USD or 2BTC.

A coin’s trading volume helps explain two things – it helps checkmate sudden rises and falls in market price, and it’s also a good indicator that the coin is actively traded.

South Africa is the 10th largest country in terms of bitcoin trading volume, thanks to P2P and spot crypto exchanges available in the country.

So far in 2021, the Ethereum network has been able to process over a million transactions per day, surpassing the number of people buying bitcoin.

Simply, an increase in volume should be seen or accompanied by a rising market which is an indication of solid buyer interest. According to a poll by CoinDesk on Twitter, 38% of traders say Volume is a crypto indicator they can’t live without. 30% voted for RSI, 23% for moving average and 9% others. This means that Volume is one indicator that you can only ignore at your own peril.

What problem does the project solve?

Just like every other business you know, a good crypto project should solve a specific problem. Bitcoin is created to disrupt the traditional financial world by eliminating the intermediary between two parties when sending funds.

Before choosing a long position for any cryptocurrency, you need to evaluate the teams behind it, you need to know the project’s mission and vision. That’s not all, you need to understand the roadmap and how plausible it is to achieve. Reading the project White Paper will reveal much of what you need to know about the coin.

You don’t want to invest in any crypto project that isn’t transparent enough with all of these. You should only focus on projects that have value and their purpose. You also need to understand whether the token is a utility token, security token, transaction token or platform token?

Carefully studying and evaluating the indicators mentioned in this article will prevent even the average investor from making bad decisions. Traders looking for long-term positions can buy Bitcoin, Ethereum and Cardano to start with because they are heavily traded and have stood the test of time.