Factors to Consider Before Trading on High Volatile Altcoins
Despite the usual direction to Do Your Own Research (DYOR), some investors are always eager to jump into the market and purchase such tokens. This is not advisable.
Some of the factors that must be considered before trading such high volatile altcoins include:
The Team
The team is as important as the token itself. Some projects are launched by fake teams. They aim to get added to top cryptocurrency monitoring platforms, such as CoinMarketCap, CoinGecko, and Nomics. Consequently, these unverified teams pump liquidity into them. After the token has liquidity, you must check the profiles of the listed team members and advisors on professional platforms like LinkedIn. If the listed team members have not posted about the project on their profiles or job histories, the project could be a scam. It is wise to check recommendations from other users with whom they have worked. You should also keep an eye on the date because a new account may have been registered since the last time you checked. The career histories of team members show that they are capable of solving any unsolvable challenges.
The Exchanges Where Tokens are Listed
Exchanges are sometimes prone to listing tokens with manipulated prices and trade volumes. If such exchanges have a negative track record of making investors lose their money on high volatile projects, it is imperative to refrain from buying such tokens. However, if the token is present on top exchanges like Binance or WazirX in India, with a track record of promoting their users' safety, the risk is reduced.
Liquidity Level
Trading high volatility cryptocurrencies listed on decentralized exchanges could be a mistake. These cryptocurrencies have low liquidity. The token creators or developers might lock users' funds in such a way that after having made a great deal of money from investors, they will disable sales. They will only allow purchase orders. The trading of projects with low liquidity might not be a good idea, especially if the volatility of the project is high.
Real-life Application
Tokens should not be created and listed in the market for listing's sake. Some governments have banned cryptocurrency because of its volatility problems. Tokens with a real-world application are sure to rise one day despite dips. Bitcoin suffered several corrections, yet investors are confident about it because it is a store of value and allows peer-to-peer transactions. High volatile altcoins must have a roadmap to penetrate the mainstream to increase their adoption. This adoption will help reduce volatility.
