How To Trade Crypto: Choosing The Right Coin

How To Trade Crypto: Choosing The Right Coin

This is the first of a series from Coinbook teaching you how to trade crypto. There are thousands of crypto projects to choose from. Many projects have failed, but almost all have proclaimed to be the next bitcoin. Most of these projects start with a ton of media, noise, and hype but after a big hype cycle they die back into obscurity. This video teaches you how to choose a project to trade. The research involved to pick a winner is outlined below. The idea is to find a coin that is trading within a reasonable range based on the coin supply. Compare other coins with similar coin supply to get a general idea of what range the coin should be trading in. If it’s high, stay away until prices come back to normal.


The circulating supply is very important since you can get a sense of how much of the coin supply is still waiting to be dumped on the market. Most coins have a hype cycle at the beginning since the available coin supply is so low and order books are thin. Once the bulk of the supply is actually in circulation prices come down and start trading in a more measured range. Knowing this can save you from an expensive mistake. The rate at which coins enter the economy is very important as well. If your coin is adding coins at a rate double or triple the rate at which dollars are printed, there is built in pressure for your coin to decline against the dollar. If you find one that has little to no inflation, your coin stands a chance to increase in value simply based on the amount of dollars being printed. This becomes key in cases where you end up holding an amount of your traded cryptocurrency long term.


The next thing to check is that your coin has enough liquidity for the amount you intend to trade. Be careful to check this in times of famine as well since some coins will trade 10 times their volume during hype cycles and then order books become thin and volume drops. The best way to check is to find the exchange that trades your coin and look at the order book. You can see how much the exchange would allow you to buy and sell and how far away from the spread you would have to dig to fill your position. If the volume is high and the spreads tight, you’ll lose less money getting in and out of trades.


Finally, trading a coin that is at least 1 year old will solve almost all of your trading problems when it comes to finding the right coin. After a year, there is a higher percentage of circulating supply out in the market, you can see if the community is active and still engaged, you can see if the inflation rate and distribution has been honest and consistent, etc. The order books will be normal and liquidity will be realistic. All crypto will have ups and downs so there is plenty of opportunity to profit - especially if you watch the rest of my series on “How to Trade Crypto”!

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