How to Pick the Winning Altcoin

Photo by Steve Johnson on Unsplash

So, you've probably heard multiple stories about projects that grew anywhere between 50x and 1000x, and turned people into millionaires.

In fact, that’s why most people become interested in crypto. Naturally, they would like to become success stories as well.

Many turn to following various crypto influencers and jumping into projects mentioned in their videos or tweets. Of course, as thousands of others are doing the same thing, there’s a very high likelihood that these projects have already increased in price quite a bit before you managed to get in.

Ideally, you need to find something new. But how does one pick the right project when there are close to 10,000 coins currently listed on CoinGecko?

In this article, I will talk about few things to look for when trying to find a project with 10-100x potential for growth.

Below are some of the questions you should ask yourself:

What is the purpose of the project?

Kind of obvious, but it’s crazy how often people just invest in a project simply because "they’ve heard about it."

But they have no idea what it actually does.

You should always read the whitepaper and critically analyze it or at the very least, go through all the information on the website, announcements and updates on social media etc.

Ask yourself the following questions:

- Does this project offer something new?

- Is it better or different from other similar projects?

- Is it easy to understand?

- Is it easy to use/interact with?

Every ecosystem (Ethereum, Cardano, Polkadot, Solana, etc.) will always need few core protocols – a dex, a launchpad, an oracle and some sort of a defi platform (borrowing and lending).

When new ecosystem is being developed or gains functionality, these projects are the ones to look for.

For example, Cardano recently successfully enabled smart contracts on its mainnet and we’re currently in a phase where these protocols are being developed to bring full functionality to Cardano.

Of course, the difficulty is that there are multiple projects in each category and no one knows, which ones will become the most popular and therefore valuable.

Unique ideas are great but an average idea with great implementation will often beat a great idea with poor implementation.

Take Apple as an example – their ideas are rarely new and groundbreaking but what made the company successful is how they implement these ideas (often in a form of sleek design), backed up by solid marketing… which brings me on to the next point.

Does this project have a strong community?

The success of a particular token depends on two things: usability and marketing. There are multiple dexes, launchpads, oracles, defi protocols etc.

The ones that perform best are often not necessarily the best ones or the ones that were first to the market but rather the projects that have the biggest following, strongest community and biggest support from the influencers.

Check out all main social media channels of every project you’re interested in – Twitter, Telegram, Discord. Is there a lot of chatter about it? Are any crypto influencers talking about it?

Of course, there’s a bit of a paradox here – if a project is already popular, then most likely it has already pumped quite a bit and you’re a bit too late to get maximum gains. So, you have two options here:

1. Either take the risk on a project that has a lot going for it but so far pumped very little and still has low market cap.

2. Or pick a project, which dumped massively during a market correction.

Some examples of solid projects, which had a lot of support earlier in the year but are now in the gutter are Blank (secure, private, non-custodial wallet - still down around 89%), CardStarter (launchpad on Cardano – down 87%) or Oraichain (oracle, down 92%).

If these projects go back to their previous ATHs, you can get easily 8-10x, which is already pretty good but the expectation is that they will go much higher than that, once Bitcoin hits the new ATH.

Is it something trendy? (Or Likely to Soon Become Trendy)

You may have already noticed that there are periods when particular crypto projects become very popular.

Summer 2020 was all about DeFi. Earlier this year, we’ve seen a sudden spike in interest in NFTs, which then happened again on an even bigger scale around August-September.

In recent weeks, crypto gaming (P2E - play to earn) started picking up quite rapidly.

Unsurprisingly, projects within these areas are likely to perform better however, they may also dip more if the attention shifts to something else.

On the other hand, if the attention is on them, they can easily outperform the market, even when the market overall turns bearish, as we’ve seen with NFTs this summer.

What’s even better is a project that combines multiple trends or attributes - for example Altura, which combines NFTs and gaming and is also on Binance Smart Chain, which massively reduces gas fees. Another good example is Seedify, which is a launchpad for gaming projects (launchpad + gaming + Binance Smart Chain).

Are the Tokenomics Solid?

In short, the tokenomics is the topic of understanding the supply and demand characteristics of cryptocurrency.

Without knowing the tokenomics of a particular project, it is difficult to assess the potential price fluctuations of a token.

The information about tokenomics is usually provided on the project’s website. The main things you need to know are:

• How many tokens are (or will be) released?
  
• When the tokens are going to be released (how many at what intervals or points in time)?

• Who holds them and who will receive them (for example what percentage of tokens is owned by the founders of the project, early investors, advisors etc.)?

Also, you should take the current market cap into consideration. For example, a tiny project with a market cap under 10 million USD can potentially pump much more than a project that maybe is better overall but already sits at a few hundred million.

Does it interest you?

Unless you’re Elon Musk [<3] or a big influencer (slim chances that either of them are reading this article;-), a project is probably not going to be successful just because you’re interested in it ;-).

However, having an interest or experience in a particular area can help a lot in researching the feasibility of a project.

You don’t have to be an expert in all types of crypto projects – it’s much better to focus on the ones that really interest you – whether it’s gaming, finance, security and privacy or something else.

Conclusion

It’s impossible to predict with 100% certainty whether a particular project is going to be successful or not.

Investing at a very early stage in a low cap altcoin will always be one of the riskiest ways of investing in crypto and it makes sense to only have 10-20% of your portfolio in such projects.

But at the same time, with a bit of research and a touch of luck, you can find something that will generate a truly life-changing amount of money.

I hope you found this article helpful and interesting. If you’re interested in crypto tutorials and crypto market commentaries, please check out my YouTube channel and follow me on Twitter.

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Disclaimer

The content covered in this article is NOT to be considered investment advice.

I’m NOT a financial adviser. These are only my own speculative opinions, ideas and theories.

Do NOT trade or invest based purely upon the information presented in this article.