David O.

@davidolarinoye

7 early signs that shows a crypto project will underperform

Dedicated to those investing in crypto who don’t want to lose money

Photo by Austin Chan on Unsplash

We are in the crypto heydays. Even with this bear market, it is still an heyday. Lots of things have been happening. Some people are selling at a loss while smart people are just coming in now. The institutional investors things seems to be a mirage for now, and the ETF approval is, well, out of sight for now.

As much as I want bitcoin to go back above $12k, I want it to be done in a phenomenal way. Growth from outside the ecosystem should not increase the value of cryptos, rather it is growth from within the ecosystem. 2017 was the year of ICOs and it was a major factor that boosted the value of cryptocurrencies. So far 2018 has been the year of regulations, false hope and delayed implementation.

Nothing phenomenally different has come out of the crypto space so far this year. Crypto is supposed to be the disruptor, there ought to be something significant that replaces the traditional way of doing something. In 2017, the crypto way of raising funds for a profit venture went mainstream. What’s new about the crypto ecosystem this year? That is the question we should be asking, because it probably holds the key to getting out of this bear market.

There are myriads of blockchain projects seeking investor’s attention. Many of them desirous for money into the project. Never be swayed by the current price of a crypto, you need to understand that a significant portion of people into crypto today are traders. While true believers in the project buy to hold, traders buy to sell. This information is for those who buy to hold. While you may decide to sell at any time, the intention at the point of buying is to hold.

It may be hard to spot a winning crypto, because this is a very long game. It is still too early to tell who will win big. However, it is quite easier to spot those that won’t. So, here are 7 signs that shows a crypto project will underperform.

Don’t let your emotions get in the way of you acknowledging what’s wrong about the project you are invested in. Keep a open mind. While 1 or 2 can apply to a number of projects, 4 or 5 applying to a project is a bad sign
1. Early problems sticking to timeline

This is a sign of incompetence. If at the early stage of the implementation of the project, they have to begin shifting the deadline, target and roadmap, it is a bad sign. If the project has gone a long way and they get to an area where they had to extend time, it is still considerable. However, if the project implementation is just 1 month or 2 months old and they are far behind the roadmap, there is a problem.

The founders and the team might be great and wonderful people. In fact, they can be well skilled, vast and good communicators, but an early string of delays speaks just one word: incompetence.

The answer is not always to sell the crypto. You could have a little faith if you believe they will grow up.
2. Diverging information from project leadership

Just because a blockchain project is decentralized doesn’t mean there should be no leadership. There ought to be a clear pattern of leadership for every project. The structure of leadership can be different, but there must be people who take responsibility for the project as if it were their very own kids.

Decentralization gives us a lot of faces and voices in the various crypto projects. However, the moment you start hearing diverging information from the leadership of the project, something is about to go wrong. It can start from little things like the correct timeline for a task. This sign must not be confused with a community manager who is not well informed or who has not been updated concerning a recent change. This has to be something from the leadership. Diverging information from a core member of the team also counts. It is an early sign of conflict.

Diverging information that are quickly ironed out may not count, but a constant reoccurrence might be a serious sign. Also, if the issue is not quickly ironed out and made to linger for a significant amount of time before resolution, you have your sign.

3. Dodging of critical questions

There are many ways to answer a question, one of it is to dodge the question. Dodging a question simply means to respond to a question without providing the information requested and acting like the information you provided is relevant and sufficient. When founders and project leaders dodge critical questions, it is a sign of secrecy and the last thing you want in a decentralized project is secrecy.

It’s okay if the question is a trivial one. It’s also okay if it is a long term question that cannot be determined at the moment. If none of these is the case, it is a bad sign. If the one supposed to answer the question really doesn’t know, the person should come out clean about it, say what is known and give a timeline for the question to be properly answered.

Putting your money in a decentralized project with secrets is like buying an iPhone that has no known phone functions.
4. Too many factors to be conducive for the project to be successful

If 80% of the project have to come out great for the project to be successful, then it is a bad sign. This time, a sign of bad business model. If the project needs perfection at all ends to succeed, the chances of failure is high. If the chances of failure is high, the project might as well end up dead.

Life is not predictable; things change, circumstances happen. If the project cannot deal with that, then there will be a problem. It is almost certain that at least one thing will go wrong at some point.

If one wrong thing will deal a significant blow on the crypto project, it’s better you don’t get in at all.
5. Lack of a strong community

Many projects are excited to raise money through a large community but then, when issues come up a large community is not an asset. I have seen the same questions answered again and again on some Telegram chats. Just when you thought everybody has gotten it, someone pops in with a worried message. Notwithstanding, having a community is a must for any decentralized project.

Just because the community is large doesn’t mean it is strong. Strong means believers in the project. For example, if the project is on healthcare, how many healthcare workers or employees in the healthcare industry are in the community. It’s important that token holders are not just speculators. This is what makes a community strong.

Lack of a strong community shows critical inability to go mainstream. If the project cannot go mainstream, it will not get to the moon.

As an investor, the focus is to get on the winning team, not to inspire a losing team. Leave the inspiration to the big funds and corporations.
6. Already existing centralized use case doing fairly well

A popular figure in the crypto world insists on the fact that most crypto projects are unnecessary because they cannot and will not be able to compete with the centralized counterpart. This is a solid argument. If the centralized use case is already existing and doing well, it is a big challenge to the crypto project. The project may not rise as expected. Expectations are not so high if it is something that has not been done before. But if it is a replacement, the expectation is high. If the expectation is high, people will get quickly disappointed. This disappointment can terminate the credibility of the project and make tokens worth zero.

An already existing and centralized use case doing well means that the crypto project has an identity crisis. What is the case to make the project decentralized if it is doing well being centralized? It is easy to criticize and state the wrongs about a centralized model, but try to look at their success and list their achievements. Can you match it?

A project with an identity crisis is one you should be wary of. Tread with extreme caution.
7. Changing the rules of participation abruptly

This looks small but it is a huge sign. When a project is decentralized, it means a fellow cannot just wake up one morning and change the rules (and everybody has to line up to it). If that happens in a decentralized project, it is a sign that the project is not really decentralized. And that means that you weren’t sold what you requested to buy.

Changing the rules of participation without the appropriate consensus is a sign of falsehood. It might be unintentional falsehood but it is still falsehood. The big thing about decentralization is consensus. No decision must be forced on participants except the ones expressed in the whitepaper. If this happens over a little thing, then it is very likely it will happen over a big thing in the future.

In this case, do what you must.

In conclusion, you must remember that these are signs and nothing more. The project leaders can see these signs and fix the problem before it arises. However, if neglected these are the signs that foreshadow underperformance. My definition of underperformance is a disappointing reality. We are still in the early days but that is not an excuse not to be behind the winning cryptocurrencies.

Cheers!

P.S. Score your crypto project of a total of 7 marks based on the above points. The more the score, the more terrible it is. You may post scores in the comments :)

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