Cryptocurrency is a type of virtual currency that uses cryptography and is decentralized, meaning it has no specific government or financial institution holding it. It is built on blockchain technology, which allows secure and transparent transactions without any intermediaries. As such, cryptocurrencies are not subject to national regulations, making them an ideal option for those looking to create their own currency or exchange it for another currency.
In this article, we’ll discuss how you can find the best crypto to buy first in 2023. We’ll also discuss what factors should be considered when choosing a cryptocurrency and provide tips on how to do market research on your chosen cryptocurrency at every step. By following these recommendations, you can make informed decisions about which crypto to invest in and avoid potential risks. Let’s get started!
How to Choose a Crypto to Invest in 2023
Deciding which crypto to buy is one of the most important steps in getting started with cryptocurrencies. However, it can be overwhelming if you don’t know where to start. That’s why we’ll cover everything you need to know about finding the right crypto for beginners so that you can make the most informed decision when buying and selling your favorite digital assets.
One thing to note is that as crypto prices rise and fall, there are fluctuations in prices, so never rely solely on price alone. Instead, look at other aspects like security, trading volume, liquidity, utility, and community that will determine whether or not you should consider investing in a particular coin.
1. Security and Privacy
Security and privacy are essential considerations when investing in cryptocurrencies. While there are many different methods in which cryptocurrencies can be secured, general guidelines include using cold wallets, hardware wallets, and software wallets. When purchasing a digital asset, you should always consider its security features and try to ensure that your investments are kept safe and secure.
For example, while Bitcoin (BTC) remains the world’s most widely used and trusted cryptocurrency due to its high transaction speed, it may become less secure over time. If you plan on storing your profits securely in a wallet app, you should choose a reputable company that offers strong encryption keys and a comprehensive security strategy.
Another consideration is the use of private keys. Private keys are the unique codes that allow users to access their coins and prevent others from doing the same. You want to choose a public key which is easy to read and is not easily hacked since anyone who knows the private key can read it. Keep in mind that the more people who have access to the private key, the easier it can be to create new tokens. Therefore, it’s better to keep it secret.
2. Trading Volume
Trading volume refers to the number of times a particular cryptocurrency has been traded within a specified period. For example, in December 2017, according to CoinMarketCap, Bitcoin was trading at $3,500. The next day, it dropped to around $1,500, proving that BTC had been significantly affected by significant changes in the market. Since then, BTC has recovered quite well and currently trades at around $6800.
Trading volumes increase when a cryptocurrency gains popularity among investors and increases its value compared to its previous historical highs. This means that Bitcoin experienced massive growth after reaching $60,000, making it a relatively risky investment, but it also made a huge impact on the crypto industry as thousands of traders found themselves in new opportunities to earn money through short-term bets.
3. Liquidity
Liquidity refers to how easily a cryptocurrency can be transferred from one person to another. Low liquidity indicates slow transactions, whereas high liquidity implies fast and efficient transfers. Listed below are some common examples of cryptocurrency whose liquidity ranges from low to high; they’re listed in order of importance.
Bitcoin (BTC) – High liquidity
Ethereum (ETH): Medium-Low liquidity
Cardano (ADA): Low liquidity
Solana (SOL): Averagely low liquidity
Solana (SOL): High liquidity
4. Community
Community refers to the social aspect of a particular cryptocurrency. The size of the community and its engagement with the platform matters greatly, as well. A large user base that has developed a dedicated support and knowledge base is highly desirable. Here are some excellent communities to look out for; they help build credibility and trust in the ecosystem, therefore, increasing its attractiveness to both newcomers and seasoned users alike.
5. Utility
Utility refers to the practical capabilities of a cryptocurrency, specifically how accessible it is as a medium of exchange. Consider this when taking a quick look at the list below; it illustrates the top 20 cryptocurrencies with the highest level of utility.
Ether (ETH): High utility
XRP (XRP): Moderate utility
BNB (BNB): Minimal utility (but still valuable)
USD (USD): Highly helpful for international trading
Binance (BNB): Limited utility
DOGE (DOGE): Moderately useful for global trade
IoT (IoT): Useful for data collection
6. Market Cap
Market cap refers to the total value of all coins combined into one unit. Most altcoins are available in smaller amounts compared to ETH, but they possess certain strengths which makes them more reliable. According to CoinMarketCap, the largest token by market capitalization is Ethereum ($9.3 billion), followed by Cardano ($4.5 billion) and Solana ($7.2 billion).
In addition to being big, cryptocurrencies with larger market caps have higher chances of seeing major price movements. For instance, BTC has shown drastic change in just a few months; it went from $0.08 to almost $2,000.
7. Scalability
Scalability refers to the ability of a cryptocurrency to handle large volumes of trades. There are several ways in which a cryptocurrency can scale, including increasing block sizes and reducing transaction fees.
Scalability matters because cryptocurrency exchanges offer various services to meet the varying needs of different markets. Some notable ones would be Lightning nodes for faster withdrawals, Compound protocol for increased risk mitigation, Dapper Labs for faster multi-signature transactions, and Tendermint for greater stability. These developments allow the network to process more transactions at once without compromising security and transparency.
8. Transaction Fees
Transaction fees refer to the amount of fees charged by exchanges and wallets to facilitate transactions, which vary depending on the blockchain. Each cryptocurrency on our list charges different fees, ranging from free to high enough to discourage transactions.
Some websites may charge lower fees, while exchanges may charge higher fees to protect their customers. However, the benefits outweigh those costs, especially in case of DeFi applications, where transaction fees can be a substantial barrier to entry. Check out the chart below illustrating the average fee rate for each category of cryptocurrency.
9. Trading Fees
Trading fees refer to the cost of buying or selling a particular cryptocurrency over a set period. They typically range from low-to-high, depending on the underlying cryptocurrency and exchange. Some popular platforms, such as Binance, leverage and borrow money against the actual cryptocurrency instead of withdrawing fiat. This way, the owner gets paid back in full as soon as the transaction settles, but the exchange often earns a commission on top.
Traders can either withdraw their earned profit directly or reinvest it in the future and expand their portfolio during volatile market conditions.
10. Exchange Platform
Finally, investing in cryptocurrencies can be a lucrative venture, and the choice of an exchange platform is crucial as it influences the accessibility and availability of the market. An exchange platform refers to the marketplace where buyers and sellers interact. Decentralized exchanges comprise popular options for cryptocurrency purchases; however, there are also centralized exchanges, like Coinbase and Robinhood, offering simple and straightforward service.
While there are numerous choices for online exchanges, here are the best three for beginners:
Coinbase
One of the oldest and most established platforms in the game, Coinbase allows for peer-to-peer trading across multiple networks, helping to reduce transaction fees and promote wider availability across borders. With its intuitive interface, Coinbase supports a wide range of blockchain types and ensures that you’re able to swap any of the top 15 cryptocurrencies to your preferred exchange. On top of its feature sets, Coinbase offers a robust referral program that helps to incentivize users to join the exchange. Pros Cons Users must have a Coinbase account to purchase securities via exchange. Transactions may incur fees, which depend on the payment method and the product used. No minimum balance required. More advanced users may experience slower processing times during peak hours. Popular features: Fiat and Spot Exchange Services, Earnings and Staking Offers, Mobile App, Competitive Prices, Deposit & Withdrawals.
Coinbase Pro
Another one of the most recognized exchanges in the space, Coinbase Pro provides a host of additional functionalities and tools designed to cater to sophisticated and professional users alike. Among other things, the app allows for direct deposits and withdrawals, allowing for instant transfers. Furthermore, it comes with enhanced mobile functionality and native advertising to drive traffic to the platform. Pros Cons Built-in Rewards Program, Instant Payment Service, Direct Deposits and Withdrawals, Native Advertising, Advanced Features like Multi-signature (MSS) and Bank Rollup.
Exchanges. Exchanges are web-based platforms that enable users to buy, sell, swap, or stake tokens on behalf of third parties. Many exchanges combine the two — spot trading with margin trading — providing even more convenience than standard brokerage platforms. Whether they offer spot and margin trading or only one or the other depends heavily on the platform, and while spot trading is cheaper
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