Did you know that 55% of all new cryptocurrencies failed in 2018?
Ouch. It’s a sobering number.
Choosing the right cryptocurrency can be daunting, especially with the high failure rate of new cryptocurrencies in recent years.
With so many options available, it can be difficult to determine which tokens are worth investing in.
To help minimize risk, we have created a 10-step blueprint that can guide you through the process of selecting a cryptocurrency.
Here are four (non-exhaustive) ways that will give you an edge when choosing a cryptocurrency.
1. The Team & Roadmap
One of the most important factors to consider when choosing a cryptocurrency is the team behind the project.
A strong team of individuals with relevant experience in industries such as finance and technology can greatly increase the chances of success. It’s essential to scrutinize the experience of those who will be leading the project and to check for legitimate credentials.
A positive example would include a team with members who have backgrounds at prominent companies such as Google and Apple, and advisors or board members with experience in relevant industries.
2. Read the Whitepaper, if you dare
Another way to evaluate a cryptocurrency is to read its whitepaper. While it may seem daunting to read a technical document, understanding a token’s whitepaper can quickly sort the wheat from the chaff.
Whitepapers outline a project from top to bottom and provide insight into the problem the token aims to solve, whether blockchain is necessary to solve the problem, and what competition the token faces.
It’s also important to note that even the best whitepaper in the world doesn’t guarantee a token’s success.
3. Does the token have a use case?
Ok, so you’ve settled on SpaceCoin – the next interstellar currency. It sounds cool, has a great team, and ticks a lot of boxes.
Cool those thrusters, Elon.
This could well be the next greatest cryptocurrency on the market but before making a decision, it’s important to evaluate if there is a genuine gap in the market that SpaceCoin solves uniquely. Can similar solutions be found in existing cryptocurrencies like Bitcoin?
Additionally, consider your investment time horizon. Will it take years for a potential return on your investment? In this case, it’s important to consider whether the need for an interstellar currency is something that requires solving soon.
Instead of waiting for the unlikely possibility of a partnership with SpaceX or NASA, consider investing in cryptocurrencies that are addressing current problems in the crypto space, such as Ethereum’s scaling issue. Many tokens like EOS, Cardano, and Tezos are working towards solutions for this issue and could yield a larger return on investment.
4. Does the token have liquidity?
Finally, make sure the token has liquidity. The top 20 cryptocurrencies have strong liquidity, and brand recognition, and are traded on high-volume exchanges worldwide.
Without buyers and sellers, no coin can survive. Be wary of investing in tokens that are only sold on small, less regulated exchanges as they may not have the same level of liquidity.
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Joe Shew
Founder & CEO of Crypto Consulting Institute
Sam McDonald
Head Analyst
