Cryptocurrencies have become the hottest virtual asset classes to invest in in 2024. In particular, Bitcoin and Ethereum have soared in value from pennies to thousands of dollars for every unit within a decade’s time. When it comes to crypto investment, the price is what the investors pay, but the value is what investors get. It is easy to look up the current crypto prices but extremely difficult and sometimes impossible to evaluate their realistic values in the coming years.
In this article, we will help investors evaluate crypto prices based on different factors that can help them determine the crypto’s worthiness in the future.
While evaluating a cryptocurrency’s worthiness in the present and future market, it is important to understand the purpose of the crypto project and its use cases. Crypto projects with a clear and practical use case in solving real-world problems are the most successful. Choose crypto with a well-documented white paper outlining its technical details, plans, and vision. Check whether the cryptocurrency has a realistic roadmap for adoption and development and scrutinize its long-term goals. Verifying whether those goals align with the investor’s investment strategies is also important. To evaluate a cryptocurrency, investors must understand the technology behind the cryptocurrency’s development. Essentially, a cryptocurrency is built on the blockchain network, and every blockchain comes with its features, use cases, security, and scalability. For instance, Bitcoin is the world’s largest cryptocurrency that focuses on being a decentralized virtual currency, while Ethereum, the second largest crypto, supports decentralized applications and smart contracts. Hence, understanding the technologies, limitations, and potential are crucial to evaluating a crypto’s worth. Additionally, one must also find the ultimate goal of the crypto. This requires understanding the utility and use cases of the cryptocurrency. Some cryptocurrencies, like Bitcoin and Ethereum, aim to be a medium of exchange and store of value, while others, like Chainlink, allow data transfers between real-world applications and blockchain.
Cryptocurrencies have different regulatory environments varying significantly across the world. To evaluate a crypto’s worth, investors must ensure that the cryptocurrency they are considering complies with their jurisdiction’s relevant rules and regulations. This makes the crypto project compliant, regulated, and less likely to face legal issues, leading to long-term viability.
Additionally, security measures are essential tools of a crypto project. Choose cryptocurrencies with rigorous technological audits and an excellent track record of secure operation. Vulnerabilities and hacks can lead to massive losses; hence, avoid choosing shady cryptocurrencies that often become scams. Furthermore, to ensure transparency and reputation, explore the team behind the cryptocurrency and choose those with a rich background of well-known developers, advisors, and founders. This ensures the cryptocurrency has an excellent reputation, trustworthiness, and transparency. Avoid stagnant projects, as they can be a major red flag, and instead, choose projects with community engagement and regular development. Look for the common cryptocurrencies that the top crypto casinos and exchanges accept. This ensures that the cryptos are widely accepted, adopted, and popular worldwide.
The crypto market has started constructing metrics for cryptocurrencies, such as the P/E ratio, to evaluate the relative value of digital assets that represent a considerable difficulty for crypto investors. There is a global fallacy that cryptocurrencies cannot be evaluated in a particular way. However, investors commonly use many crypto valuation metrics to assess the effectiveness and worthiness of crypto and make comprehensive comparisons. Some key metrics to value cryptocurrencies include price-to-sales ratio, price-to-earnings ratio, market cap to TVL, network value to transaction ratio or NVT, realized cap, and market value by realized value or MVRV.
Essentially, it takes tremendous exemptions to evaluate cryptocurrencies with inherent value for any given crypto. No one can correctly predict the extent to which crypto can rise or fall in the next 5 to 10 years. Crypto will have a dominant market share over time, but not all will survive equally. However, based on the above factors, such as the purpose of the cryptocurrency, competence, reputation, transparency, and market metrics, investors can choose their cryptocurrencies and evaluate their worthiness in the market.