Want to know what the best feeling in the world is? (Reading a Altcoin Investment guide.)
The best feeling in the world is buying an altcoin, right before it leaves earth for another dimension.
It floods your brain with endorphins. That hyped-up feeling when you have a good gym workout. That cuppa tea you have after a hard day’s work. None of it compares.
Perhaps that’s more telling about me though. You know, that buying altcoins makes me euphoric. But I’m pretty sure you’re somewhat similar–and if you’re not, you soon will be.
There is a method to the madness. Forget what you’ve heard about it is impossible to predict the market. You don’t need to predict pumps with pinpoint accuracy to make money in crypto.
All you need is the knowledge required to make profitable decisions.
The 3 key components
- The ability to identify undervalued projects
- A nose for shitcoins
- Discipline, self-control, stoicism
You’re about to build the first two. The last one will come with experience, though you’ll save years of heartache and margin calls with the knowledge found here.
A quick note to the reader
I am not a financial advisor, this guide does not constitute financial advice. You should take everything you read in crypto with a grain of salt. Everyone has ulterior motives, even me. The writer. We are human after all, and humans are fraught with biases and sorcery.
What the above in mind, I have compiled my methods and madness for you as best I can. I hope you look back fondly on this post as having given you some powerful insight into your crypto investment career.
Best exchanges for cryptocurrency
It’s wise to start where there are accessible altcoins.
The most accessible coins are available on exchanges. Coins on exchanges have had some level of vetting. And there are millions of people that have access to that coin.
CEXs (centralised exchanges) are where you’ll be spending a lot of your time. Perhaps this will change in the future as a decentralised exchanges catch on more. But, for the time being you must make sure you have accounts with these exchanges. Click the links and create accounts as my referral, it’s a win-win for both of us; you get rewards, I get rewards, both getting richer.
- Binance: The Walmart of crypto. This is where everybody shops. They have the most features, loads of coins, they’re safe.
- Coinbase: The Apple store of crypto. Looks nice, feels nice, works.
- KuCoin: Kucoin is really good. They’re similar to Binance, but they also offer a lot of lesser-known cryptocurrencies. Some of these coins will become diamonds.
For the newbies, I think it’s good to familiarize yourself with DEXs (decentralised exchanges). But honestly I’d stick with the centralized ones (above) for now.
When you feel more confident with crypto, you can take steps into the underworld of DEXs. There’s a fair amount of tinkering to get hooked up with these exchanges, but it can be fruitful once you’ve gotten setup. But again, no need to sign up with these right now.
- Uniswap: An Ethereum-based decentralized exchange. Fees will murder your balance. There are incredible projects launched here before they are available on any other exchange. About the fees: there are steps you can take to reduce Uniswap fees.
- PancakeSwap: A Binance-Chain-based decentralized exchange. Great for BSC-based currencies. Fees are super low. Looks like a Ponzi on first impressions, but is actually a solid multi-billion dollar Uniswap clone.
- Pangolin: An Avalanche-based decentralized exchange. The place you go for AVAX based currencies. Also very cheap. But mostly ultra high-risk coins, for now. Note: Pangolin is great for trading Ethereum-based coins too, as it’s interoperable you don’t get pummelled by Ethereum fees–we’ll save this for another post in the future.
Pick a coin at random
By trial and error, I want you to pick an altcoin–literally pick one at random. Pick one that’s available on one of the exchanges you just signed up to (I’d try Binance for this one).
Your decision should be based purely on the following factors–and just trust me on this, there’s substance to it:
- The coins name
- What the logo looks like
I like the look of NEO. The name sounds attractive, and logo looks professional. I could see this being something, regardless of the fundamentals. The chances are that many others will feel the same way too. The Matrix was a good film.You might not realise this, but you’ve just analysed (on first impressions) their brand. A coins name and logo have influence.
We shouldn’t judge an altcoin solely on this. But unfortunately, that’s often what humans do. There’s more to this though.
If the project is worth its substance, they will factor marketing into the mix too. There are no doubt some hidden gems with awful logos and names. But this exercise is purely to demonstrate something important.
CoinMarketCap aggregates cryptocurrency data. Everything from the prices to links to the whitepaper. We should start here and search for our coin–the one with the nice logo and name that you just picked.
CoinMarketCap is great for the following reasons.
- Information: Non-biased pricing and market information
- Links: It collates important links and details on the project
- Comparison: Enables easy comparison with other cryptos
Here I’ve searched for NEO on CoinMarketCap## Vital questions that you must ask when you’re researching a coin on CoinMarketCap
The depth of research that we can go into is boundless. But this is my checklist, and it has served me well over the years. When looking at our coin you should ask the following questions.
What is ‘market cap’?
As present, NEO has a Market Cap of $1.6b. So it’s likely a legitimate project.
Though market cap isn’t the only indicator you should use, it’s still a great quantifier of how much a project is worth. It also helps speculate on and how much room for growth a coin has when compared with similar currencies.
Crypto market cap ranges
These ranges are based on my own opinions. I quite adventurous, and my use of mature should be taken with a grain of salt. There are literally no mature projects at present, bar perhaps Bitcoin.
I generally categorize coin’ market caps using the following scale … or somewhere around this:
- $10b+ most mature
- $5b+ mature
- $1b+ somewhat mature,
- $100m+ medium moon potential,
- $10m+ good moon potential,
- $1m+ uber-high risk
- $1+ probably a scam, or dead project
The sweet spot for me is somewhere between $1b and $10m. But there are projects with potential that have already exceeded $1b market-cap valuations. For example, Polkadot.
But if it’s the ticket to the Lambo store you’re looking for, and you’ve only got a little capital, you’ll need to heighten your risk tolerance.
Bitcoin and Ethereum both have market-caps in the hundreds of billions. But we could still see these projects’ market caps grow exponentially. Though it is unlikely they will 100x overnight.
Supply & Dilution
Once we’ve assessed the market cap, we need a deeper picture of the market capitalisation. This is easy. We can get granular information by assessing:
- The circulating supply. Which tells us how many coins currently exist and are in circulation.
- The diluted market-cap. Which tells us what the market cap would be if all coins were in circulation at the current price.
Some coins are released with the entirety of their supply, but not all of them are.
I prefer coins that have most of their supply in circulation–and for the following pseudo-science-backed reasons (do with them what you will):
- Coins with low circulating supply. They will see their prices wane over time as more supply is introduced. This is simple economics.
- Coins with all supply in circulation. Was distribution fair? How were the coins obtained? Who owns them? Will mega-whales dump their holdings?
- Coins that have some supply left. There is an incentive for people to partake in the network. Whether through mining or staking, this will attract users, developers, investors.
Gaze those bloodshot eyes over the charted price
When looking at the charts, there are numerous insights that can be determined. We want the core ones.
- How long has this cryptocurrency been trading for?
- How does the price compare to previous levels?
- How does the price compare to the 2017-2018 bubble?
- How has the market cap changed in relation to the price?
- What does the price trend look like?
- How volatile is the coin?
- Have they been any worrisome pumps/dumps?
- How much volume is there?
- What is the trend of the volume growth?
Using the NEO chart above as an example:
This altcoin has been around for a long time. We can see that the coin has been tracked on CoinMarketCap since 2017; a long time in the crypto world. Great, we’ve got something that’s aged over time and hasn’t gone to 0.
The price is low in comparison to previous years.
The price has some important hidden factors though. Something you won’t see if you’re a newbie: the price has been made low because of the dilution of the marketcap. More coins have been created. NEO is a hybrid minable/stakeable coin. This is incredibly important. It is unlikely that it will go back to $160+ regions quickly, because there is way more Neo in the market. More supply.
NEO’s price compared to Bitcoin has fallen recently. Despite seeing a growth in the USD price, the trend since Jan 2019 is generally bullish (upward), though not as volatile as in the past.
Volatility is low currently. Great, we’re less likely to go broke tomorrow. But, we need volatility to make money.
There are no real notable pumps or dumps, perfect. Okay, yes there’s the 2018 price reset, but frankly, everything in crypto followed the same suit. We can see that the volume has been growing too, over time. In fact, the volume is exceeding that of what it was prior to the 2018 price explosion. And, the volume is growing.
Given the above, I feel positive about the high-level pricing and market capitalisation.
Check their website
This where we’re going to find the main gems and leaks. Can the project be bothered to put together a website?
If the coin has no website, AVOID. It’s likely dead, an ex-scam, and/or too immature that it should no be invested in. Fortunately, the one we’ve picked looks really promising.
NEO has a nice, professional website, with animations, and important links to what the project is, how to get involved, the ecosystem, the wallets.
Projects with ecosystems have other projects running on them. This introduces a level of dependency on this project and further solidifies it as a solid project that is being used and is desirable.
What is the use-case?
No use-case? No-go. Just because there are buzzwords, it doesn’t legitimize what they’re doing. It’s hard to cut through the jargon, but you’ll build an understanding over time if you research the terms.
The guys at blockspot.io have a done a good job at defining common crypto buzzwords.
It is up to you to learn more about what the projects are offering. Use common sense on whether you feel the market cap fits its use case. Let’s say we find a project that allows the decentralized rating /review of ice-cream. But the diluted market cap is $10 billion? This should throw warning signs. Avoid at all costs.
Deciphering the whitepaper
What is a whitepaper?
A whitepaper is a document that details what a project is, the technology used, the mission, and technical details.
Value from whitepapers
Whitepapers can be hard to read. If you’re not well versed in the technical stuff, you’re going to have to hit the buzzword list. However, they often disclose risks to the project. They also detail the problems the project is looking to solve. There is a wealth of information that is often not publicized about projects hidden in these whitepapers. Read them.
Avoid projects with large risks. Invest in projects with innovative solutions, branding, and a well-documented project. If the project is worth their weight, they’ll detail the risks, and if it looks like its going to cripple overnight, avoid the mess.
Important note: Whitepapers are often copied by scam projects. Google some of the paragraphs, check their authenticity. The more you read, the easier it will be to identify.
Vetting the team
Find the team
Most cryptocurrencys’ sites show the team working on the project. Larger ones might struggle if they have a huge team, but for the most part, you’ll be able to find the core developers and execs.
Research the team members
Google their names. Have they ever been in a scam before? Do they have bad publicity?
If they’ve worked on previous projects they’re likely a good bet. The more experience, the better. Have they worked at start-ups? Are they all based in somewhat law-abiding countries?
Check the Github
WTF is Github?
GitHub is an open, version-control, storage site where developers store, update and distribute their code. We can physically see how often the codebase for the project is being updated.
Most of these projects are open-source. If they’re not, be wary, I am not keen on centralized projects.
Check Github. Open-source, decentralized projects are probably on GitHub. If they’re not, but they claim to be open, question this. Bombard the telegram group chat. Demand you see the code.
Check that it is active
We want active projects. Active projects means that it’s improving, adapting and has invested stakeholders working on it.
Looking at the NEO codebase on Github, I can see that last update was 10 hours ago.If the codebase hasn’t been updated in years, then avoid it. Simply put, if the developers aren’t working on it, we’re not interested. Sure, the developers might come back no the next bull run, but don’t wait around with monopoly money just ‘cus. The market is still young, and if the developers have quit at the first milestone, their project probably isn’t going to be around in few a months.
Questions to ask
- What is social media saying about our coin?
- Is the sentiment positive?
- Is there any coverage of any regulatory action against the coin?
- Is it being targeted by pump groups?
Crypto ticker-tagged tweets
Dollar-sign prefixes. By prefixing the coins ticker name with a dollar sign, we can see tweets targeting this product. For example,
The sentiment here seems fairly positive. People are posting about the project, both trading and giving it word of mouth publicity.## Buy some of the crypto
This the final stage. Go to the exchange where you found the coin, and buy some! The easiest step of all!
Before you buy, check if there’s any pricing disparity across exchanges. You could find a cheaper offer. If a coin is liquid (people are trading it) bots will probably have already arbitraged the price across exchanges. Arbitrage bots are a whole world of complexity that I might cover in a future post.
There’s a huge level of detail you can get into when researching and buying altcoins.
My approach is to first choose a coin that looks and sounds good.
Once I’ve found an interesting altcoin, I’ll look it up on CoinMarketCap, and get a picture of the coin’s price, supply and market cap.
If it seems attractive, I’ll read into their website, determine what the project does.
Then I dig into the whitepaper, the team, and their development consistency.
Lastly I’ll research the sentiment on social media, and scout for any bad publicity or negative sentiment.
Then finally, I’ll buy some!