Just like the market boom of the “Dotcom bubble” in the late 1990s, cryptocurrencies follow a similar trend line, at least for the initial progress, there are too many out there to choose from. But how do you know which one to choose? How do you know what you’re buying is a front just to have your hard-earned money? In this post, we will enlighten you with what to look for and where to look to be able to sift through hundreds and hundreds of different cryptocurrencies out there!
Reliable sources for researching the background and status of a coin can be found on the coin’s WHITEPAPER, forums (REDDIT, STEEMIT), and the coin’s SLACK channel or blog.
1) What existing problem is solved by the Coin?
The main purpose for the creation of Bitcoin is to be able to solve certain issues that exist in fiat currencies (i.e. inflation). When choosing a coin to buy, ask yourself if this coin solves any existing problem that has not yet been solved by other coins. Usually, those “first-of-its-kind” coins have a significant advantage over a few, such as can be seen in privacy coins. If the coin you are looking into doesn’t solve any problem, better run away from it.
2) What is the advantage over other Coins?
Bitcoin may have been the first to address issues in fiat currencies, but it too has some issues such as high transaction fees. Altcoins have come to the surface trying to improve on other coins’ features and have thrived in doing so. There may never be a single coin to address everything, a magic bullet (or coin). It’s up to you to weigh which coin is economical or efficient to use.
3) Who supports the Coin?
Coins that are supported by giant companies do well relative to others. This is because people feel a lot better when someone trusts them – someone whose insight is gold (i.e. Bill Gates, Elon Musk) backs the coin. One of the key aspects of psychology is “Social Proof” which may play a role in this area. People who encounter a group or a mass of people who are doing the same thing (ex. Looking at the sky), will unintentionally do the same.
4) Are there legal problems that can hinder the Coin’s growth?
Doing business that has some legal concerns unchecked isn’t a reliable business, especially in the long term. The government has the power to close companies or ban certain products or services.
5) How good is the development roadmap?
Having good plans for the coin is tantamount to growth. A company that has no clear goals will not grow as properly and as efficiently as those that have objectives and timelines placed. This makes everything professional and people who have invested in the company feel confident that their investments will grow.
6) How experienced is the development team?
This area is probably self-explanatory. Good chefs make good food. Good architects make good designs. Good farmers make good crops. Although not always, a great development team can make good coins.
7) How do they spend their money?
What best way to put this is through an analogy: you, the hard-working, ever-so diligent employee that you are, are required to pay taxes for your salary. This tax goes to the government for their projects and whatnot. How would you feel if everyone in Congress drives a Lamborghini or owns several private jets, which are bought with the people’s money? By your money. Check how the group spends the money. Is it to further improve their systems and the overall of growth the company; if so, then it’s a check!
8) How active are the developers in responding through their official channels and discussion sites?
Customers are what keep a company alive. No customers, no sales. Getting in touch with the people, seeing how to help them more, and being able to engage with them, just makes things better in terms of business. Especially in a world of FUDs, active developers who engage regularly with their community provide trust and support.
9) Do they stick to their target deadlines?
I can certainly give examples of this for a certain coin I know. But let’s not get into specifics. Good developer teams are those who can stick to deadlines. Those who cannot stick to deadlines usually will have a massive FUD for those who have the coin.
10) Is the coin supply finite?
This one feature is relatively good as this eliminates the issue of inflation. Although there are debates on how big should the total supply of a coin be, that’s another story. Keep in mind, that a coin with a low total supply has a higher chance of going to the moon, as they say in the crypto world.
11) What is the consensus mechanism of the Coin?
This is important to know how the coin is being “minted” into the supply. You don’t want a coin that is given through an MLM strategy or referrals. What you want is through PoW PoS or some other uniquely designed and great way to have their coins in the market.
12) What is the market capitalization of the coin?
Market capitalization = circulating supply x current price. This is a measure of the value of all of the coins currently in circulation. The higher the market cap of the coin, it can be implied that there’s either a high price or a high volume of people who have the coin. Or Both. Coins which has high market cap is regarded to be a good coin and not a shit coin due to the demand for these coins.
14) How many coins do the developers have?
Market manipulations can happen when one or a few individuals have an enormous chunk of the coin’s supply. We don’t want that. The last thing we want is for the developers to suddenly flush millions or billions of coins to the market causing price drops as supply increases relative to the demand.
15) How even is the Coin’s distribution?
This is somewhat similar to the previous item. For every coin, some are called “Whales” and are characterized by being a holder of huge amounts of the coin which is estimated to be around 100 or more. And since a single person has a huge supply that is readily disposable, this can disrupt market conditions at a time.
Last but not least, check whether if the coin you’re interested in is associated with any SCAM. The last thing you want to put your money in is a group of nasty thieves promising you things they won’t fulfill.