Why do some cryptocurrencies fail while some succeed?
Most people often need guidance on how volatile the crypto industry can be. When Bitcoin first came about, it initially flopped. Still, soon after, it picked up and is now considered one of the most successful cryptocurrencies. Suppose you’re wondering; What is Bitcoin doing differently, and how do I know which cryptocurrency will fail or succeed? Find out below!
Understanding the Cryptocurrencies that have failed
More than 20,000 cryptocurrencies have been recorded to exist, and more numbers likely have gone unnoticed. However, only a few cryptocurrencies have remained relevant and retained some value. Due to recent crypto hype over the past few years, many cryptocurrencies have emerged to benefit from the increasing demand.
In addition, my crypto experts and investors firmly believe that cryptocurrency will surpass other digital currencies and tokens in the future of finance. It offers many benefits, including increased security and transparency on the decentralized ledger. Some businesses also accept crypto as payment, which may also be used to exercise voting rights.
Meanwhile, crypto development has helped to make the industry more accessible to a wide interest group which is why many cryptocurrencies exist today.
Why do cryptocurrencies fail?
Although we don’t know the exact number of failed cryptocurrencies that there are, it’s not hard to tell why there are so many dead coins. Here are the most common reasons why many cryptocurrencies fail:
- Saturated Market: Due to the influx of thousands of cryptocurrencies over a small time frame, the market has become oversaturated. It has become more challenging for new coins to gain momentum and splash in the crypto space. As a result, many young creators abandon their coins when they do not gain any real value.
- Volatility: Cryptocurrencies are largely unregulated, which has made the market very unstable. Prices can drop and rise within seconds, and many investors can lose their entire fortune from a crash. In addition, if the supply exceeds demand, this can cause a significant dip and cause a coin to flop. This places heavy risks on both crypto investors and creators in the industry.
- Scams: Cryptocurrencies are easy for anyone to develop and are susceptible to scams. This makes it harder to tell which coins are legit or malicious. Many crypto scams have collected money from investors and abandoned their currencies, leaving investors stranded.
- Inadequate Funding: Another reason many cryptocurrencies fail is the need for proper monetization. Builders need to generate funding from investors before they can make any development. However, while finding investors is hard enough, you must ensure they get returns from their investments. Most investors pull out when they don’t see actual funding, which then causes the coin to flop.
How to Tell Which Coins Will Survive The Crypto Industry?
Ultimately, it’s important to know how to avoid cryptocurrencies that are likely to fail to avoid losses. Before investing in a project, you must do extensive market research and look for red flags that come with every coin or token. You can also use social media platforms to investigate which coins are active and which ones no longer have value.