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How to Choose a Cryptocurrency

With a large number of cryptocurrencies on the market today, it’s unsurprising that choosing which to invest in can be overwhelming.

The best place to start is by looking at the altcoins most often talked about by experts. It’s easy to see a trending cryptocurrency, and invest in it whilst it’s highly priced, but have you taken into account the high rates of fluctuations that are synonymous with the crypto market?

In the past year, between July 27, 2021, and July 11, 2022, Bitcoin has fallen nearly 24%, according to Coinbase. Other altcoins tend to follow Bitcoin pricing trends, with the global crypto market having dropped about 60% since November of last year. Unlike stocks, ETFs or even U.S. savings bonds, crypto is a highly speculative investment without a long history of ups and downs.

When investing, ensure you understand the market capitalisation of the cryptocurrency you choose. Bitcoin and Ethereum together account for over 50% of all cryptocurrencies’ combined market capitalisation. You need to also consider overall demand and supply factors within crypto. The number of coins that are currently in use should also be taken into account. Any digital asset’s price rises as a result of rising demand and constrained supply, and Bitcoin is no exception. Investors should also look at the use cases of the cryptocurrencies that they are choosing. If the coin’s use case is restricted, there is a greater chance that its value will decrease and it won’t survive.

If you’re new to cryptocurrency, and keen to invest, we’ve put together a guide to walk you through the process here. If you’re already a seasoned investor and want to find out more about how you can protect your assets, get in touch with us today.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.