There is a short term herd mentality in the crypto space where many are jumping on the excitement of new coins or very speculative altcoins that most likely will not have any future.
With the constant release of new coins flooding the market place only very few have staying power over the long term. It’s wise to save your time, energy and brain power by cutting your consumption of the noise and taking the time to focus only on investments that will bring long term significant value. Be present and reduce your excitement over significant gains and outrage at scams you should have seen coming. By taking the time to analyse and investigate a coin thoroughly, you can dramatically reduce significant losses.
Here’s what can help evaluate a coin. I recommend only focusing on coins that can meet much of this criteria and forget about everything else. In the long game, you will far exceed most of the short term traders that are in this current market.
Development – Is their continued development in the coin?
Is their recent activity in GitHub (https://github.com/). Is it actively being worked on by a team of developers? Are we seeing the road map release dates being met? Do the developers have a track record of successfully delivering? If you answered "no" to any of the above then consider if this is an intelligent investment. It’s easy for developers to lose interest if their coins reach a high market cap and if the drive behind working on the coin was money. Developers that have a real purpose to solve a problem, to make an impact outside of just money. Will ultimately gain the trust of the biggest investors.Use Cases – Is their relevant and real potential use cases for the coin?
Lots of coins are forks of other coins, and unless they have something very uniquely different in comparison, they could potentially end up useless. Another question to ask: Does the coin solve a specific problem? (a problem that the original coin it was forked off can’t fix). Can this coin grow organically and be useful for everyone involved?Market Cap – Use https://coinmarketcap.com/ to look at the historical value of the coin.
Look at the prior months. Is the coin consistently within or near the top 15 coins? Is it there month in and month out? If the coin had a short claim to fame at the top and is now ranking lower and continuing lower, then consider leaving this one out of your portfolio.Exchanges – Is the coin listed on more than one of the biggest exchanges?
If not are exchanges planning to add the coin? This could be a red flag, and you should be asking why other exchanges aren't adding the coin.Monthly Gains– What price was the coin six months ago?
Has it been increasing in price over the long term and month to month? While it may have down periods that can last a month or more, look closely and more in depth to see if it might be picking up in the month following? If not it may be best to leave this one out until it is clear that the coin is improving.Personal Use – Are you using the coin?
If you are already making use of the coin outside of just trading it. This is a great reason to get behind a coin. If development is looking promising and you can see yourself using it more in the future, then it’s only natural you will encourage others to do the same. Steem and Doge are two great examples of this, with large social communities getting behind the coins.Community – Does the coin have a loyal and active following?
While many altcoins have followers, the real long term coins are the ones that have true fans behind the coin. Are they in support of the new features and development? Most of the top coins by market cap have a huge following, and they are there for a reason.Media – Is the coin making it to public media?
While the crypto community is growing every day, the general public are ultimately going to adopt the mainstream coins. So is there active development to reach the public? Some coins serve a particular purpose and may not be relevant for public use. The ones that are user-friendly and picked up by the public will be the heavy hitters. People know the big names, Amazon, Google, Apple. The same will be said for Cryptocurrencies. Just as Bitcoin is slowly reaching the attention of the masses so too will other coins once a tipping point occurs. This will exponentially increase the market value of a coin over the long term.Sustainability – Is it sustainable?
Will the coin last in the long run. Can you foresee millions/billions of people using this coin in the future?
Does the functionality and usability prepare for mass adoption? If transactions can’t be completed promptly and nothing is set in place to fix it. Don’t invest.Circulating Supply – Is the coin inflationary or deflationary? If the supply is increasing too quickly, then the value will eventually reduce. Check the maximum supply of the coin and ensure supply is capped.
I encourage holding coins not for days or weeks at a time but for months and even years. These are the coins you want to look for and the ones to invest in. Another way to think about it is if a family member wanted to put money into some coins and not actively trade rather just buy and HODL for the long term. Which ones would you recommend to them?
You’ll far exceed gains in the long term than you would on the “fly-by-nighters” that only last a week. Sure you can make 100% or maybe even 1000% gain but how many times did this not happen and how much did you risk on those speculative alt coins? Is it better to put $200 into an extremely risky coin that could potentially go up 1000% or put $2000 into a coin that has a slow gain of around 20-30% per month? While you may gain in the short term in the long run who will win the game?
The key is to improve your odds by carefully examining a coin before you invest. I recommend having fewer coins in your portfolio if it means you can put more research, money and energy into it. If you don’t have the time to do the research you could be holding too many different coins. It’s easier to be involved with 5-8 coins than try to keep up with all the news and changes of 20 different coins.
I’m not discouraging using Technical Analysis this can be useful to find good entry/exit points to the coins. Overall there are some coins you should just HODL and store away for a good amount of time. Some people simply don’t have the time to actively trade on the market 24/7 and watch it like a hawk. For those people, I suggest buying and holding some of the top coins as this can be a very effective strategy and outperform many amateur traders.
This post below shows how the top 10 coins by market cap as at Jan 01 2017 all made significant gains over a six month period by simply putting 1k into each coin for six months and leaving them alone.
While the next six months may not be as spectacular as the last six months. We can be almost certain that a majority of the coins we now see in the top 10 by market cap will still be there by the end of this year and more than likely many would have increased in price.
If you're actively trading several times per week, it’s worthwhile spending the time to look at your overall gains vs. how much you could have made by just simply buying and holding the top 10 by market cap. How much better off were you for all that extra time you invested?
For many, I would argue that it may not have been worth the time investment, or worse you didn’t beat the return you could have made. Consider where that extra time could have been spent focusing on other avenues of income that could be re-invested back into your coins and balanced between them. This strategy ultimately will exponentially increase your returns over time and likely relieve you of all the stress and panic of those extremely volatile coins.
This is the best beginners crypto investing guide I have read. You made some very excellent points.
Only investing in the top coins and holding are 2 things most investors need to do. Too many people think they can predict the tops and bottoms. If you own something good why would you want to sell it? Unless it's just to increase holdings by buying it back cheaper