ALTs are close to All Time Lows, how should you select the alts in which you could invest (End July 2019).
Considering the huge dump that ALTS have suffered over the last few months (we can almost talk about years now !) and that BTC is starting to get back up slowly, I thought it might be interesting to teach people that just arrive in the crypto market a few tips to avoid investing in “Shit” coins. It can also be considered as a reminder for people that have been hanging around for some time, and even for myself, to avoid making the same mistakes I made 2 years ago when everything was starting to move to reach All Time Highs.
Please note, this is absolutely not financial advice, and everything I write below is my very own opinion ! I also would like to mention that I won’t write about ICOs or IEOs, but about coins/tokens/currencies (or whatever you d like to call them) which are already being traded (there are already more than enough to choose from !)
1. Token informations and details
Ok, so let’s say that you have been told about yxz token (on reddit, bitcointalk, over telegram, or by a friend for example). The very first thing I would suggest you to do, is to check about this token on coin information websites. There are several websites on which you could do that, for example :
From there, you can find out different informations you should look at :
Token Value : Current price at which the token is being traded.
Circulating supply : Total number of tokens which are currently available on the market (some might be on exchanges, some might be in user’s wallets, but at any time given, this is the total amount of tokens that can potentially be traded)
Market Cap : This is the token value multiplied by the Circulating supply.
24h Volume : This is the total amount of tokens in dollar value that were traded over last 24h. For example, 300 tokens at 10$ each are sold on an exchange on one day, that would reprsent 3000$ Volume.
Total supply : Total supply is the total amount of tokens that currently exist, but include some which are not actually tradable. For example, those tokens can be locked until a certain time, and not available for trading until that time. This could happen when the team behind the tokens lock the team token until a given date to avoid selling pressure on the token from team members that would want to sell their tokens as soon as possible.
Max supply : Total supply is the maximum number of tokens that will ever exist. This is particulary used for tokens which are mined, like BTC or ETH currently. It can also be the case for stakable tokens. For example, BTC has a current Circulating supply of 17.8m but a total max supply of 21m, this means that around 3.2 millions BTC were not mined yet and do not even exist.
All time High (in btc/eth/usdt) : The highest price the token ever reached.
All time Low (in btc/eth/usdt) : The lowest price the token ever reached.
So why are those numbers important ? Because if you have some logic, you will quickly realise that it is not because a token is “cheap” (understand its current price is low) that it s a good deal !
For example, if a token has a value of 10$ but there are 4.000.000.000 tokens total, that means the market cap of this token is already 20.000.000.000$ ! To put this number in perspective, this is almost the Market Capitalization of a company such as TESLA (45.000.000.000 at time of writing) ! So, you can imagine that even if that token is like the next revolution, if it doesn’t have a working product or that it was not adopted yet by any banks/institutions/states/millions of people, it s already way overvalued ! Don’t hesitate to google your country’s biggest companies Market Capitalization to have a better idea of what represents your targetted coin/token value !
Now, let’s say you found out a coin/token with a Market Cap. of a few millions. It might be an intersting target if the project is solid, but you should definitely have a deep look at the Total Supply. Let’s have another example.
XYZ token has a value of 10$
There are 1.000.000 XYZ tokens in circulation
Which leads to a Market Cap. of 10.000.000$ which sound decent.
But if you look deeper in the numbers, you find out that the Total Supply is 100.000.000 XYZ token. That means that when the 99.000.000 additionnal XYZ token will be realeased, the total Market Cap of XYZ token will be 1.000.000.000$ instead of 10.000.000$ ! You don’t believe such things exist ? Well it definitely does, I even have been tricked myself, because of not doing my very own research on a certain token which had a Circulating of 20 millions tokens, but a total supply of 300 millions …
I would say that if the Max Supply is superior than two times the current supply, it requires additionnal investigation from you. Don’t hesitate to contact the team over telegram, or question them directly via email, on reddit or on forums, to understand why the Total Supply is so high. I also consider that if Max Supply is 10x the current supply, then you just better go away !
2. The project
So, once you have carefully looked at the different datas regarding the token, it s quite important to also collect as many informations as possible on the project itself.
Which market is the project aiming at ? Is it trying to bring solutions to existing problems ? How do they plan on making money ?
Here I don’t have that many advices to give, because this depends a lot on every single person sensitivity. Some will consider a project a real game changer, while some others will just absolutely not understand what is its purpose.
All I will say is something which is pretty well known : “If it’s too good to be true, then it s most likely not true.”
Don’t forget that we are still at the very beginning of the crypto/blockchain revolution, so the most important projects for now are probably the ones that are creating the infrastructures for the development and spread of this new technology. To make a parallel, imagine that in the 90’s, while Internet was just starting to be used by a few, a new company would have arrived saying “Hey, we are going to create the best video website ever and it will be called youtube !”. Well, that would be just a huge mistake to invest in that project at that time, simply because in the 90’s, bandwidth price was so high that even if streaming video would have been possible (which was not the case), the infrastructure wouldn’t have allowed it to be profitable at all.
So to sum up : be careful with the companies that tend to sell dream, and also, it might be a great idea at this time to focuse on a company or project which plan is to improve the infrastructure for the technology, this is probably the best approach. But this is only my opinion !
Ok, so let’s say you have selected a project, now let’s dig into the Tokenomics.
3. The tokenomics
The tokenomics in a few simple words is the economical value of a token in a crypto/blockchain project.
We can basically split this in 4 different type of tokens :
- Cryptocurrencies : The tokenomics of cryptocurrencies is pretty basic. The tokens are meant to represent a currency. The value of that currency depend on the market : the offer, and the demand. The more people want a cryptocurrency, the higher its price will go up. The less supply of this cryptocurrency there is, the higher its price will go also. The main difference between states currencies and cryptocurrencies is that cryptocurrencies supplies are usually fixed and can’t be changed. Which is the reason most people say that Bitcoin will keep going higher. Because the more people hear about it, the more people will get interesting in it, the more people will want to buy it, BUT there won’t be more Bitcoin. The supply is fixed at 21 millions.
Right now, there are around 7.7 Billions humans on earth. In a few decades, there will be between 10 and 15 Billions (so population can basically double). But BTC supply will remain the same, and the more time goes on, the harder it will be to mine BTC and even if gets one day very close to 21 milions BTC in circulation, IT WILL NEVER EXCEED that amount. So 10 Billions people on earth, and 21m BTC, that’s 0.0021 BTC per human being… and this doesn’t even consider all the lost wallets (people that forgot their private keys, or dead people which wallets can’t be accessed by anyone etc…). So in one or two decades, if BTC is still alive, that you are still alive, and that earth still exists, if you own more than 0.0021 BTC, it will mean that you are richer than 50% of the earth population.
I think this quickly sum up how you should read a cryptocurrency’s numbers. You should keep in mind though that cryptocurrency, apart from BTC and a few other well knowns tokens, are a very high risk investment. Because those cryptocurrencies are developped by people which can manipulate in many different ways the way their tokens is working (technically speaking). I won’t enter into too many details here as this is not the subject, but be careful with cryptocurrencies as mot of the time, people behind those are anonymous.
- Utility tokens : Without going any further, I ll give a very well known example of a utility coin : BNB (Binance exchange token). Originally, the only usage of BNB was to pay a lower fee on trades processed on Binance. Lots of ICOs launched during end 2017 beginning of 2018 were Utility tokens, which usually have for unique goal to allow you to use a service or have a discount on different fees for using different services. So as you can guess, the value of a utility token will completely depend on the global adoption of the service which is being given through it. It also requires to fully trust that the service will be only accessible through this token. ie : imagine a product is built, and the team deceides to allow everyone to pay with dollars or euros on it, and not anymore with the token. Then the token price will just go down.
The risk of seeing the value of such tokens remaining low is pretty high, and it s also very important to rembmer that this kind of token doesn’t give you access to any shares of the companie’s profit. It s probably one of the biggest misunderstandment of many users in the cryptocurrency ecosystem. Utility token doesn’t represent the company’s past/presnt or future value.
- Staking/rewarding tokens : This is mostly related to blockchain working under PoS (Proof of Stake) while BTC for example is PoW (Proof of Work). Holding such tokens allow you to stake them, and if you have enough of those tokens the blockchain will allow you to process transactions and reward you new tokens as a counterpart of the work involved. If you follow the rules, your tokens are safe, if you try to “cheat” the blockchain, the tokens that you stake might be at risk of even taken away from you. The value of those tokens totally depend on the blockchain usage. The more transactions are processed on the given blockchain, the more transactions fees there are, and the more valuable become those tokens are they create more value. In some ways, if you mind me vulgarizing it a lot, you could compare it as “lending” money for a determined amount of time to your bank, and once the lending period is over, you get back your money and some interests on top of that except that the money would be used to make the bank ystems work and nothing else. Usually, the higher the reputation of the given blockchain is, the higher the price of the token is, the lower the reward is.
- Security tokens : The security word comes from the traditional finance world. A Security in finance is a certificate or a financial instrument which has a monetary value and thus is tradable against money. A security can be for example a stock. Securities are used by companies and governments to raise money from the capital market from different type of investors. The main purpose of securities for investors is that they should receive at some point dividends or interests. So the idea of security tokens is to tokenize any kind of assets. A company, a building, or whatever thing that has an actual value which could be divided into a certain amount of tokens and hold by different investors all around the world. It means that security tokens are actually backed by something real, such as an asset as I just described, or by potential profits or revenues that would generate a company. As you can understand, this seems really to make a huge difference compared to what utility tokens offer, and with time there s a high possibility that security tokens will take over. But why isn’t that the case already ? Because security tokens are considered as financial instruments. And whoever talks about financial instruments also talk about regulations. At the moment Security tokens are pretty much inaccessible for many investors in different countries such as the USA. Governments’ agencies are still discussing to try to find a way on how should be handled this huge case.
I m absolutely not specialized into finance, and even less world wide finance, but we can note two things :
- Changpeng Zhao, Binance CEO, once tweeted that people should be happy that Binance is not sharing it s profits through its BNB tokens. Probably hinting that it would make it a security which would most likely kill a lot of the momentum this token has in different countries because of regulations.
- Some investment firms are slowly making their ways with the different regulators, I specially would like to mention Tritaurian Capital which recently acquired a licence for private placements of digital securities (read more here)
This is the first company to receive such a licence, and this is quiet a positive news for security tokens, which most likely will be a huge part of the blockchain/cryptocurreny world within next few years.
The conclusion of this topic is that you absolutely need to understand in what you are investing your money. If you can’t real tell whether it s cryptocurrency/a utility token or a security token, then you should definitely research more !
Let’s go back to more humanity now, and discuss about the team behind the projects.
4. The team
I think this is probably a topic that I could discuss during days. Because “the team” is the human part of the project. And human beings are probably one of the most interesting things to analyze :)
Ok, so, let’s make things clear right from the start. You want to invest in a project. You see on this project’s website that ELON MUSK is part of the team. well, let me tell you one thing : YOU ARE BEING FOOLED.
Also, you consider John Mcafee as being a top dev/hacker/tech security expert and that he has a huge authority on anything blockchain/crypto, well let me tell you a second thing : YOU MIGHT BE RIGHT BUT YOU MOST LIKELY END UP BEING FOOLED AGAIN.
To make it simple, if a project is showing off “stars” who are involved in it, then chances are that it s a scam and that those “celebrities” are either impersonified or simply paid to promote it. And this is defintely not what you should be looking for.
Honestly, after over a two years and a half digging into ICOs, and blockchain projects, here is what I found out :
- Such project needs a real leader. Someone that is totally dedicated to it, that wil spend his days and nights working on it, replying to people, trying to improve things and making complex things understandable and usable by everyone… because this is how blockchain and crypto will go mainstream : get every single human on earth to interact with blockchain in such an easy way that he won’t even realize he is using it. Just like internet today. Let me give you a few names of personalities :
- Vitalike BUTERIN (Ethereum founder)
- Eric Larchevêque (Ledger founder)
- Changpeng Zhao (Binance founder)
- Charles LEE (Litecoin founder)
These are just a few, but they definitely have a few things in common. Their important will to spread the word about blockchain and cryptocurrencies and to make this technology accessible and usable by everyone. They also all have, at least, a decent technological background. Because let’s not forget that we are still at the very beginning of this technology, and thus makes it quiet important to have some pretty high skilled technological people in their team.
- A great technical team with high skill devs. Let’s not hide the truth here. 90% or maybe even more, of blockchain/crypto projects will fail. Some because the original idea is bad, but most because they won’t be abble to gather the needed developpers to build their idea. Nowadays the gap between an idea and a success is becoming bigger and bigger. Dev jobs are getting more and more specialized, and you won’t be successful if you are not surrounded by people that are abble to create properly your product. There is a huge demand for devs on blockchain and cryptocurrencies. CZ even mentionned some months ago in a tweet (not his exact words but you ll get the meaning) : “I m sorry for other projects, but if you have any good devs, we will do all we can to get them work for us”. That’s exactly what did google, microsoft or facebook (and are still doing !) which are paying very high salaries and hiring people all over the world. Without the most competent people, the project you are investing in, will never be a game changer and probably never as successful as you would expect it o be. Not that the project won’t be abble to generate profit, but it won’t be the leader or real success story that will make the headlines in a decade, because we are at the beginning and the technology is not mature.
Depending on what kind of project you want to invest in, the rest of the team will be more or less important, whether in marketing, finance or whatever other department you can think of.
I might be wrong, but I tend to believe that the more we are moving forward into high technologies, the more people will most likely adhere to the personality cult. Because people need to follow someone that seems to understand our world. Today, in our every day life, most of us wouldn’t be abble to build even 5% of what we use daily : computers, smartphones, cars.. everything is supposed to make our lives easier, and most of the time it s the case, but the huge counterpart, is that we honestly don’t understand how it works. That’s why I do think that a great leader is much needed to see a project becoming successful (note though that for every single great leader, there are probably thousands of pretty bad leaders that think they are great ! :)
However, let’s not forget that blockchain and cryptocurrency is also about decentralization, and globalization. There are also several projects, without any leaders, without even a single visible team member, but which are slowly raising. If you can’t find any informations on the team, then it means you are probably looking at a very specific kind of project that is pretty rare but which is what blockchain and crypto is about : community work. And the only way to see how such a project is doing, is by checking its activity.
5. Project activity
This is probably the most interesting thing but also the most complex thing to evaluate in a project, when you have no real technical background. If it s a community project, you might be abble to see on github when was the last time that someone updated the code. However, you ll have no idea if what was updated was important, or absolutely nothing. If it s a centralized project, then you can only rely on the public informations that are given. You should never hesitate to go and ask informations about what is being worked on, what are the next projects etc… This takes time, and some won’t even bother answering you, but this is defintely a great idea to do it before investing into something. That’s about all I can think of on the project activy topic, because it usually depends on who you are, and how much time you have to dig into informations you can collect on the project.
Whether you are new to blockchain and cryptocurrencies or you are here for a long time, I really hope this little guide will help you in some ways. This will also definitely help me re-reading it time to times before investing. It happens quiet often that after reading a lot about a token, I end up feeling a lot of positivity for it and would almost blindly invest. But we need to keep in mind that for investing, you shouldn’t let your heart decide alone, you also need your brain to work, and think about your wallet !
Investing in altcoin is now pretty easy with the number of exchanges around. It s just a matter of a few clicks and *plop* you are a new holder ! This might be one of my next article, which exchange to choose to buy your altcoins.
If you have any other articles in minds, or any subjects in minds, please feel free to share with me, as long as it s related to cryptocurrencies and blockchain. I ll be more than happy to investigate. This is in fact a quiet interesting brain stimulation for me.
I really hope you enjoyed this article, and if you did, please consider sharing it (and clapping !), thanks !
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