Welcome back! We’re in the homestretch. After prepping you with tips on balancing your portfolio, ROI targets and the perils of overconfidence, let’s get into it. How should you go about picking actual cryptocoins to invest in.
What you want to buy will 100% be up to you. What I would like to do is give you some methods and techniques you can apply in your own decisions.
First up don’t go crazy with like, a whole bunch of different coins. If you are holding more than 18-20 different cryptocoins, you should drop a bunch and consolidate down to 8-12. Doing a good job staying up to date on your coins shouldn’t take you all day.
Thin the herd by looking at hooves and teeth, and picking your breed.
It’s easy to get overwhelmed. There are over 100 different coins to pick from on this big board alone. Throw in the ancillary businesses and ‘shillcoins’ plus ICOs, whoof. Mental Tsunami.
So first of all, look at your targets, and pick out say, 20 targets, just based on names you recognize, or do some other very high level research. You can also look at market segments you may personally be familiar with. (e.g. if you work in finance, look at ripple or stellar etc.)
The Deep Dive
Go through the website. I’ve said many times, a shoddy website with typos, bad design is a red flag. Does the site have a roadmap, a clear set of financials? Can you see who is on the team? if so, look them up on LinkedIn and vet their past histories.
If the team and/or owners are obfuscated – another red flag. In many cases all these companies have to offer is the brainpower of their team. If you can’t even see whose working on the project, how do you know it’s not a bunch of chimps banging away at a keyboard and flinging poop online to drum up business? (Looking at you Bitconnect)
Read their whitepaper, or their business plan. If it’s just a marketing plan? Red Flag. Does this product have an intrinsic value? Could it in the future? If not, why in heaven’s name should anyone invest?
Get into the action. Look at what’s happening in the Blockchainitself. can you identify whales, are they predictable, can you use that to time your own investment? If you can see where the big operators are moving it’s a powerful tool to time the market.
Check out the GitHub repository. Is there an active community working to refine and help with the code? Or is it a wasteland because only the developers are working on the tech?
Suss out the internet chatter. Is there a lot of sound and fury on reddit or other social media platforms. Is the development team engaged with the community? How much does the community seem like a booster-club rather than a place to discuss they coin seriously?
If any of these elements feels off, it’s a serious red flag. Also watch out for classic warning signs like guaranteed returns on investment.
Sidebar: Important questions
When researching I usually look for good answers to the following questions:
- What problem or issue does this coin solve?
- Where is the money coming from?
- Who is their competition, are they doing it better?
- Does a current product exist? How is it performing?
- Who is the Dev team? What is their experience?
- Is this derivative of someone else’s tech or something new?
- Do they have a roadmap and how plausible is it?
- How big is their market, what’s the potential value?
- Can their tech or idea be easily copied? (low barrier to entry)
- What problems exist with this coin, and/or company.
Get this questionnaire filled out and you will definitely have a good idea how to assign your picks in terms of risk levels.
To really zero in on your final picking decisions, you will want to do some simple modelling. You won’t need algorithms or fancy maths. I’ll lay it all out for you in part VI.
What Now?! How to survive the Cryptopocalypse
What Now?! Part II – Your Crypto investment Strategy
What Now?! Part III – Risk Management in your Crypto Portfolio
What Now?! Part IV: Check yourself before you wreck yourself