I have been developing a set of filters to help me explore the emerging Alt-Coin world for investing purposes. I will share my filters in this article.
There are so many questionable coins and tokens out there, you have to get incredibly specific because it is very easy to get lost and confused. I see a lot of people referring to “fundamentals” without much clear thinking involved.
Without further ado, here is how to spot a good Alt-Coin:
- Community enthusiasm, activity and support
Is there a Twitter, Telegram or Reddit? Is it busy? Are people primarily excited about the project or is all interest focused around the coin appreciation itself (a negative indicator). Is the Telegram or other chat channel busy? Does it appear people are excited or recommending the channel to others? Are new people joining? Has the Twitter audience grown? Has the Alexa rank of the website appreciated over time?
If you see all of these things, this is an extremely strong positive indicator.
- Execution cadence, speed of innovation, adoption velocity
Does the coin regularly get added to new exchanges? Does the coin have a public roadmap? Does the coin execute to its roadmap? Are the features new and differentiated? Do you see a constant stream of ongoing, daily improvements and announcements?
If not, avoid it.
- High value partnerships and utility, ecosystem
Does the coin have major backers of high sophistication? Can you see many potential high leverage deals between a high value partner and this project? Can the coin be used for actual uses? Has the coin issuer made steady progress on forming and extending new relations? Does the coin have an ecosystem?
If the coin is a copy of another coin that is demonstrated to be a good approach, but backed by a major player – I would generally rate this as a positive indicator.
- X-Factors, Price Action, Rules Of Thumb
I am looking for coins that have 100x potential only. I dont really care about anything that isnt going to have explosive potential. I am looking for coins valued under $1 billion, ideally in the hundreds of millions or less with the above characteristics. I like coins under or near $1. Not doing this for +30% gains in six months.
I am seeing a lot of Alt-Coins with many red flags. These include:
- Long periods of time where grand claims don’t pan out
- In the startup space, this is often a major red flag – if a company has coasted for five years without going anywhere, that is unlikely to change, avoid
- Jargon, abstract speech
- Can’t figure out what the hell they are talking about, marketing lingo
- If I can’t understand what it is in 30 seconds, not interested, something is wrong
- Lack of incentives
- Why would someone engage in this activity? What incentivizes community growth? If it isn’t clear, not interested.
- Marketing driven
- Emphasis seems to be on marketing nonsense rather than delivering results
- Weird hiring priorities
- A lot of business or ecosystem oriented hiring of people with backgrounds that dont make any sense
- Are they hiring a lot of business people and giving titles like “chief evangelist” to people with an accounting degree? Red flag
- Emphasis on empire building and appearances, avoid
- Lack of thriving community
- Empty or dead Reddit, Telegram, Twitter
- These can be faked but its hard to do it well
- Lack of Innovation Cadence
- Must be strong innovation speed
- Not backstopped
- Some of the newer coins are protected by a strong central body who do not allow them to fall and employ methods such as regular deflationary coin burns