Before Adding a New Crypto to Your Portfolio, Do This 1 Thing
Within the crypto market, it can sometimes be difficult to evaluate the underlying value of a new crypto. There are typically no cash flows or revenue streams to evaluate, and often few or no hard metrics on how a particular crypto is performing.
That's why the first step in the investing process should be understanding the tokenomics of a new crypto. Tokenomics -- a combination of "token" and "economics" -- refers to the various factors that affect the economic value of a crypto token. These factors include how crypto tokens are created, how they are distributed within the crypto market, and how they are removed from circulation. These economic factors are typically described in the white paper of the crypto. During a time of market uncertainty and volatility, having a good grip on tokenomics can save you from investing in an overly speculative crypto.
One big mistake that many investors make is using market capitalization as a primary benchmark for judging the relative attractiveness of a certain crypto. They'll check the list of the top cryptos by market cap, notice that meme coins Dogecoin (CRYPTO: DOGE) and Shiba Inu (CRYPTO: SHIB) both rank in the top 20, and conclude that they are potentially good investments.
Source Fool.com
