For users of cryptocurrencies, this idea of choosing the best currency is fundamental to helping them make money rather than lose money. And, as with any new technology, there are potential risks as well as rewards. It’s important to do your homework.

Like most people, you’re probably a pro at using the currency in the country you live. In fact, “choosing” a currency may be a totally novel concept to you. According to a recent study, some of the most widely used and largest cryptocurrencies include:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Dash (DASH)
  • Monero (XMR)
  • Ripple (XRP)
  • Litecoin (LTC)

Before you jump into any one of these listed currencies, it’s imperative that you do your research.

What to Look for in a Cryptocurrency

When discussing money and finances, you should expect that you’ll need to conduct some analyses. To do this, you’ll want to investigate key features of cryptocurrencies that exist. Three areas to look at are:

1. The Size of Different Cryptocurrencies

The size of the currency can give you a feel for the adoption rate of the cryptocurrency. You can evaluate this by checking the market cap of the cryptocurrency, which will indicate the relative size. For instance, market caps are calculated by multiplying the circulating supply of cryptocurrencies by the current price.

Currently, the cryptocurrency with the largest market cap is Bitcoin. The larger the market cap, the easier it is to buy and sell your cryptocurrency. As of April 22, 2019, the 10 highest market caps in cryptocurrencies are:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Ripple (XRP)
  • Bitcoin Cash (BCH)
  • EOS
  • Litecoin (LTC)
  • Binance Coin (BNB)
  • Tether (USDT)
  • Stellar (XLM)
  • Cardano (ADA)

Market caps are always fluctuating and changing. This means it’s important to research market caps at the time you’re interested in purchasing cryptocurrency.

You also want to consider how cryptocurrency as a whole is doing throughout the world. Based on recent trends, it doesn’t look like cryptocurrencies are going anywhere anytime soon. For instance, in 2018, the state treasurer of Ohio began accepting Bitcoin for state tax payments. Germany’s largest food platform started accepting Bitcoins as payment in 2019. This means you could order food from over 13,000 restaurants with Bitcoin.

Another way to get a feel for a cryptocurrency’s adoption rate and size is by looking at the number of wallet addresses. Currently, there are somewhere between 5.8 million and 11.5 million wallets that are active. While this can give you a feel for size, it isn’t entirely accurate for determining how many users a currency has. This is due to users having multiple addresses.

Not all cryptocurrencies have gotten widely adopted like Bitcoin. Common traits of highly adopted cryptocurrencies include:

  • Scalability
  • Privacy and anonymity features
  • Decentralized networks
  • Increased usage by companies and retail stores
  • Ease of use
  • Being accepted by major wallet platforms such as Coinbase

2. New Cryptocurrency Technology

We live in a world where technology is constantly evolving. This means when you’re choosing a cryptocurrency you want to look at what new technology it has. For instance, Ripple introduced its xRapid solution. This is a payment platform that works to minimize liquidity costs for international transactions.

Some other up-and-coming cryptocurrency companies that utilize new tech include:

  • Qtum. This cryptocurrency combines advantageous aspects of Bitcoin and Ethereum into one powerhouse. It utilizes both blockchain technology and smart contract technology. It also recently unveiled its x86 virtual machine, which expands its reach by allowing developers to code in any language. This is a feature that Bitcoin and Ethereum do not have.
  • Aelf. This cryptocurrency has aimed to increase the number of transactions per second its blockchains can process, and has both Ethereum and Bitcoin beat. By significantly increasing processing speed, Aelf works to make cryptocurrency more attractive to businesses that process large volumes of data.
  • CEEK. Virtual reality has been a big trend in recent years. CEEK has incorporated blockchain and cryptocurrency tokens into a virtual space. When users increase their comfort with cryptocurrency in the virtual world, it affects the actual world’s transactions as well.

3. Cryptocurrency Security Features

For most people, security is a big concern with any financial transaction. After all, you don’t want to lose your money. When dealing with cryptocurrencies, you want to prioritize security even more because it’s entirely online and digital.

Features that enhance cryptocurrency security include:

  • Public ledgers. These ledgers help ensure all transactions are valid and the currency is only used once.
  • Decentralized systems. You never want to invest in a cryptocurrency that is not a part of a decentralized system. No one group should be controlling the cryptocurrency. Instead, a peer-to-peer network should validate each transaction. Peer-to-peer networks help reduce tampering with transactions that can occur in a digital environment.
  • Rules that govern transactions. Cryptocurrencies are built on a foundation of rules. For instance, in Bitcoin, transactions must be verified by other users, known as miners. Rules that govern transactions and are unchangeable help keep cryptocurrencies secure. These rules are essential for eliminating cheating, tampering and double spending.
  • Anonymity features. Many cryptocurrencies also include features for staying anonymous. These allow cryptocurrency owners to conceal their identity. Some cryptocurrencies with anonymity features include:
    • Monero (XMR). Monero uses unlinkable and untraceable transactions, as well as other anonymity features. Monero conceals not only the sender and receiver, but also the amount of the transaction.
    • Dash (DASH). This cryptocurrency purposely mixes up the details of multiple transactions. It then records these transactions as one single transaction. With this method, there isn’t a way to see who sent currency and where they sent it.
    • ZCash (ZEC). This cryptocurrency utilizes a tool called “Zero-Knowledge Proof.” This tool allows users to conceal their address to other users that they send money to, allowing them to stay completely anonymous.

Red Flags for Cryptocurrencies

Investing your money can be an exciting time—so long as you stay aware of certain red flags that indicate problems. With cryptocurrencies, the red flags to keep an eye out for include:

  • Low market cap. The higher a market cap is, the larger the market is. High market caps also indicate more liquidity. This means you’ll want to avoid low market caps, as it’s easy to lose money on your investment. It’ll likely be more difficult to complete transactions in low cap markets.
  • If the blockchain is centralized. Decentralization is a key feature of blockchains. It helps keep data secure and ensure that no one can tamper with or manipulate your transaction.
  • Grammar errors. If you’re on a cryptocurrency site and notice grammar issues, this may be a sign that the site is not credible. In this case, you should find another cryptocurrency.

In addition to these warning signs, you’ll also want to avoid investing in cryptocurrency if you:

  • Are bad with technology. If learning new technology isn’t something you’re good at, you may want to find something else to invest in. New and emerging tech is the foundation of many cryptocurrencies.
  • Don’t have a lot of time. Breaking into the new realm of digital currency is going to take learning and time. Especially, because cryptocurrency is considered a high risk item. Also, you’ll want to take the time to ensure that you aren’t getting involved in a scam.
  • Are not prepared to lose money. As with any investment, there’s risk. Normally, the government backs your investment with regulations. However, with cryptocurrencies, there are no regulations or governments. Therefore, you could potentially lose all your money if something goes wrong.
  • Already have high-risk investments. If you’ve already invested in high-risk items, then you may not want to add cryptocurrency. People have suffered very large losses using cryptocurrency, so it’s important that your portfolio can handle the risk involved.

Short-Term Cryptocurrency Investments

If you want to make quick profits, you can consider short-term cryptocurrency investments. Some key components to short-term investments include:

  • They’re usually about three to 12 months long. In some cases, they may be one to three years. Generally, short-term investments are not longer than five years.
  • You can convert your returns easily. For instance, you should be able to convert your returns to cash without any holdups.

For short-term investments, you’ll want to consider a few key questions. These include:

1. Does the cryptocurrency have a high or low market cap? In most cases, a low market cap is a red flag for investing in a cryptocurrency. However, if you’re looking for a possible quick investment, a low market cap cryptocurrency can yield high rewards, but is riskier.

Low market caps have the potential to explode in value compared to higher market caps. It’s similar to investing in a startup. They can fail and you lose a lot of money fast. Or, they can take off and you make much more in a shorter amount of time, compared to investing in something that is already established.

2. Does the cryptocurrency have a high trading volume? You want a high trading volume. You can check trading volume at The trading volume on this site shows you the amount of the coin that has been traded in the last 24 hours. This value represents how many people are buying and selling the cryptocurrency.

Long-Term Cryptocurrency Investments

If you’re looking for a long-term investment, cryptocurrency can pay off. Just as with any long-term investment, you want the cryptocurrency you’ve invested in to do well over an extended period of time. To make sure you pick the right cryptocurrency, you’ll need to set your investment goals. To set these goals, you can ask yourself these questions:

  • What is the reason you’re investing in cryptocurrency?
  • Over what time frame do you want to sell the cryptocurrency you invest in?
  • Do you want to sell your cryptocurrency all at once or in different sections?

Answering these questions can help you organize your thoughts surrounding cryptocurrency. This will allow you to better know what you’re looking for. In addition to these questions, you also want to identify which cryptocurrencies fit best for a long-term investment. To do this, you’ll want to consider:

  • The technology that the cryptocurrency uses. For instance, cryptocurrencies that have lasted the longest usually operate with blockchain technology.
  • If the cryptocurrency is already widely adopted. Bitcoin and Ethereum appear to pose the lowest risk for long-term investments. This is due to their higher market caps, which yield higher liquidity.
  • Are their developers behind the cryptocurrency? In most cases, you want to invest in a cryptocurrency with a strong team of developers. These developers help advance the cryptocurrency and keep it relevant. Staying relevant to users helps ensure that the currency will survive longer. This is important for long-term investments.

If you’re looking to expand your financial scope into cryptocurrencies, don’t slack on researching. Analyzing the adoption rate, security, and anonymity of a cryptocurrency may just save you from losing money.

And let’s not forget the individuals who have lost their entire life savings in the volatile cryptocurrency space. To spare yourself from this fate, do the right research—before you invest.