How To Choose Cryptocurrencies To Invest In

How to choose cryptocurrencies to invest in

Deciding which cryptocurrency to invest in is difficult for many reasons. Social media is abuzz with advertisements and we all know at least one virtual coin enthusiast.

How to Choose Crypto Currencies to Invest in?

We would be rich if we bought Bitcoin in 2009! The hype is attractive to even the most disciplined financier.

The cryptocurrency world is a cornucopia of impressive computer science, innovation, mixed information, entrepreneurship and even criminality.

But you can cut through the complexity by focusing on just two factors when searching for the best cryptocurrency to invest in.

In this article, I’ll explain how you can determine which cryptocurrency to invest in. I’ll discuss the coins, themselves, rather than cryptocurrency futures or investment funds.

Those are assets worth of their own analyses.

As well, I’ll only define “the best investments” as the ones with the greatest potential for a monetary ROI. Some people participate because they believe in the coin’s mission.

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What are cryptocurrencies?

Cryptocurrencies are virtual coins that only exist online.

The first, most widely known and most commonly used coin is Bitcoin.

How to choose cryptocurrencies to invest in

In general, cryptocurrencies can be acquired in two ways:


Your computer (or other hardware) can solve complex mathematical problems that are devised by the cryptocurrency’s governing algorithm. It will be rewarded for its efforts in cryptocurrency.

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This is known as “mining” for coins.


You can buy and sell cryptocurrencies (which have already been mined) on cryptocurrency exchanges. You can also accept payment in cryptocurrency (e.g.

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you sell me something and I pay you in Bitcoin). Transactions are recorded in a general leger called a “blockchain.”

Due to the nature of their production, cryptocurrencies are decentralized.

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That is, the government does not control or influence their supply or demand. Unlike the US Federal Reserve, for example, nobody can “print” a virtual coin.

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For that reason, they are theoretically immune to inflation. Their value cannot be eroded by monetary policy.

Cryptocurrency transactions are encrypted and thus almost impossible to trace.

This feature is touted by privacy advocates. But they are also employed nefariously. Cryptocurrencies are often used for criminal enterprise, including selling drugs, weapons and even child pornography.

They’re a concern for banking, securities and tax regulators, who require transparency to perform their duties.

What to know before investing in a cryptocurrency

Before choosing which cryptocurrency to invest in, it’s important to know the following:

You’re probably breaking the law

The legal status of virtual coins solicitations is questionable in most jurisdictions. For example, in 2017 China banned Initial Coin Offerings (ICOs) altogether.

It is likely that cryptocurrencies are securities (investments), which means that they must be purchased and sold through licensed brokers.

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Sales of cryptocurrencies should therefore be done via prospectus or through exemptions from prospectus requirements. To date, no virtual coin has registered with securities authorities in any western country. If you buy or sell a cryptocurrency as an investment, there’s a good chance that you will contravene the law in multiple jurisdictions.

You can’t properly research cryptocurrencies

Research is key to deciding which cryptocurrency to invest in.

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But it is impossible to verify the following about most virtual coins:

  • Who are the developers?
  • What is the governing algorithm?
  • How are transactions encrypted?
  • Who are you buying from?
  • Who are you selling to?
  • What is your money being used for?
  • What are the tax implications of the transaction?

Most of these questions are basic disclosures for any investment.

You would never buy a stock or a piece of real estate without knowing the answers. If you tried to sell an investment to someone without sharing that information, you would almost certainly be breaking the law.

Keep in mind that there’s a difference between the truth and what online cryptocurrency advertisements say.

How to choose cryptocurrencies to invest in

If you cannot verify the details, then you cannot do real due diligence.

For the purposes of comparison, a company issuing stock publicly would have to:

  • Issue a prospectus
  • Include audited financial statements
  • Disclose the personal addresses of the directors
  • Include an opinion about tax implications
  • Include comprehensive risk disclosures

This is typically done in 200-page legal documents, not on a 5-page website.

Of course, opacity is the whole point of cryptocurrencies.

They would be less interesting and useful if they weren’t anonymous. However, the concept is antithetical to making a properly informed investment decision.

You’re likely investing in a scam

Since you can’t thoroughly research a cryptocurrency, it’s impossible to tell whether it is legitimate.

For example, how do you actually know if there’s a mathematical foundation to the coin?

How to choose cryptocurrencies to invest in

Unless you have seen the code and understand the relevant algorithms, you don’t.

For instance, personally, I believe that Bitcoin is real. I think it would be almost impossible to commit a fraud of that scale.

How to choose cryptocurrencies to invest in

But I don’t know who created it, how the algorithms were developed, where the information is stored and what I’m mining. All I know is what I read on the internet. And if you blindly trust what you read online, then I know a Nigerian prince who wants to talk to you.

I also admit that my perception of Bitcoin is influenced by:

  • The public attention it has received
  • The introduction of Bitcoin futures
  • It’s length of time in existence

But, again, none of those are sound research principles.

If my assumptions about Bitcoin are correct, then it would take an incredibly smart group of people to create any legitimate cryptocurrency.

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It would require sophisticated backgrounds in computer science, mathematics and programming. Craig Wright, who claims he invented Bitcoin, has two Masters degrees and a PhD.

As such, what is the more likely scenario? That each of the hundreds of cryptocurrencies are backed by different groups of technological geniuses or that there is, in fact, no real mathematical foundation to most virtual coins? Logic would indicate that the majority of virtual currencies are amateurish at best and frauds at worst.

Note: cryptocurrency websites usually appear impressive and have great marketing material.

That doesn’t make them legitimate!

How to determine which cryptocurrency to invest in

It’s okay to work with limited information, as long as you recognize it.

That’s an important part of assessing risk. The problem for most people who invest in virtual coins is that they don’t realize the disclosure deficits.

They usually don’t understand what they’re signing up for.

How to choose cryptocurrencies to invest in

But knowing what you do, here’s how you can decide which cryptocurrency to invest in:

Search for independent intellectual opinions

Part of the reason I believe Bitcoin is legitimate is because I’ve read publications written by legitimate computer scientists.

While even they don’t have the tools to thoroughly investigate the virtual coin, I put more faith in them than I do in random Facebookers.

Try to find independent research about the coin in question.

This is key to determining which cryptocurrency to invest in. You should verify the authors’ backgrounds and appropriately qualify them as experts.

How to choose cryptocurrencies to invest in

The goal is to help figure out whether you’re about to buy into a scam. Remember, nice websites, impressive LinkedIn pages and well-written articles with big words do not equate to legitimacy.

Assess the marketing and advertising

Unlike assets like gold or real estate, there is no widely-accepted fundamental reason to invest in a cryptocurrency.

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Rather, people do so for any of the following reasons:

  • They want to make money
  • They find it interesting
  • They believe in the technology
  • They are conspiracy theorists
  • They want to hide their money

The only way for a cryptocurrency to rise in value (without manipulation) is for demand to outstrip supply. That is, the more people buy it, the higher its price will go.

Unfortunately, the majority of purchasers are convinced by the hype, rather than facts. People are talking about it. It’s in the news. Their friends are investing. It’s everywhere on social media. There are even internet memes, affiliate and coaching programs sprouting.

One of the many social media campaigns to capitalize on cryptocurrencies.

For that reason, the best way to decide which cryptocurrency to invest in is to analyse the marketing potential.

  • Are any big names or gurus online promoting it?
  • How professional is the website?
  • Do intelligent-sounding people support it?
  • Could it catch fire on social media?
  • Is there talk about accepting it as mainstream payment?
  • What’s the marketing angle (why should people invest?)?

To be blunt: how easy will it be to convince uninformed people to buy in?

Indeed, the smartest group of computer scientists could develop an incredible cryptocurrency.

But it won’t matter if nobody knows about it.

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You need great marketing and advertising to be successful. It’s exactly like a pump-and-dump stock scheme, but just with a different product.

Conclusion: which cryptocurrency to invest in

I wrote this article to help you decide which cryptocurrency to invest in, not to provide ethical commentary. Some people won’t take issue with participating in a Ponzi scheme as long as they get in before everyone else.

Others might be confident that their target coin is authentic. But viewed from an amoral perspective, there are only two things to look for:

  • Intellectual opinions that indicate legitimacy
  • Potential for widespread promotion

As long as they remain anonymous, the fact is that few of us know with complete certainty whether any virtual coin is real.

It’s important to approach these investments with open eyes. That will help you find the best cryptocurrency to invest in.

I should also note that many cryptocurrency developers are pursuing noble objectives, such as creating technologies for superior data security. But, unfortunately, their efforts are intertwined with those of amateurs and crooks.