Choosing the right cryptocurrency to buy isn't as easy as you might think. With about 10,000 projects to choose from, knowing how not to invest in crap cryptos requires some training and experience.
In this post, I'll try to give you a couple of pointers on how not to go down the wrong road, and how you can know if a project is worth investing into or not.
When I was introduced to crypto assets, I didn't know much about what blockchain technology was and why I should care.
Mining, proof-of-work, proof-of-stake, and DeFi where all alien terms to me, and it was a bit of a struggle to wrap my head around them.
But like with anything in life, the more you learn about something the more it starts to make sense as you go along.
It didn't take me too long to get familiar with these terms, and if you're new to this space it won't take you long either.
If I can do it, so can you.
This post isn't meant to be an exhaustive rundown on how to choose the right cryptocurrency to buy, but more of an outline in what to look for when choosing a project.
Remember, this isn't financial advice. Treat it as my personal opinion according to my experiences.
Here are some things to look out for, when you're trying to invest in the right project.
Dogecoin, Shiba Inu, Safemoon, Dogelon Mars and a list of others are considered "meme tokens".
They are trend coins which I like to call them, and most of them have none to little utility.
What do I mean by utility? Real-world use cases.
First of all, it's more accurate to describe cryptocurrencies as crypto assets.
Currencies are issued by governments, and as such, only they can create fiat out of thin air.
Assets are designed to make you money, so they need to do something that solves a problem.
Take Ethereum for example.
This project is a massive platform which has a ton of utility.
One of it's function, is in bringing democracy to the financial sector.
Need a loan? No problem, you can jump on a platform which I use and highly recommend which is Celsius.
Built on the Ethereum blockchain, Celsius allows you to earn interest on your crypto assets, generating you passive income.
Celsius allows you to borrow against your assets regardless of your credit score and financial situation.
It won't even check your credit, or ask you those details.
Just a simple solution to unbank yourself from legacy finance.
Co-founder Alex Mashinsky has a history of building successful corporate startups with some 35 patents under his name.
Source: Coinmarket cap
Mashinsky has a long-running history in the internet development sphere, having worked on the Voice Over Internet Protocol (VOIP) in the 1990s and other technologies since. Celsius is far from Mashinsky’s first corporate venture, with seven startups and 35 patents to his name, the project’s official website states.
Meme Coin Mania
Meme coins don't really offer real-world solutions, and are not something you should go all in on.
Dogecoin was created as a joke and wasn't intended to offer any utility.
But somehow that joke of a coin as of this writing has a $31bn dollar market cap.
But, because of its high valuation and mainstream appeal, newbie investors, like I did in the beginning "ape" into this project hoping it will make a lot of money.
Sure you can make money on some of these meme coins, but you need to know when to get out of these high-risk projects.
Remember, the crypto markets are cyclical. When prices are rising across the board for long stretches of time, we're in a Bull Run.
Alternatively, when prices continue on a downward trend for long extended periods, like a couple of years, then we're in a Bear Market.
Disclaimer, I own some Shiba..
Shiba Inu, which looks like the second runner up to Dogecoin, is trying to add some utility to the project.
One of which is accessing NFTs on its platform, while giving users a bit of transparency via audits.
Shiba has a swap feature which you can swap your Ethereum for Shiba which is nice if you're heavy into the project like that.
I own some Shiba Inu, but it certainly doesn't make up a huge part of my portfolio.
I love the crypto space, and I believe everyone should have a couple of those "what-if's" projects incase they moon.
Don't invest more than you're willing to loose.
If the project were to go to zero today or tomorrow, it wouldn't have a major impact on my portfolio.
But other meme coins like Safemoon, CumRocket, and PooCoin are super high-risk projects that you should stay away from.
These projects take advantage of the "meme coin" maina, and will most likely tank during the Bear Market.
Higher risk projects will usually have a crazy total supply.
Dogelon Mars has a supply of 1,000,000,000,000,000 coins ( 1 quadrillion).
That's way too much.
I don't even know what number that is without Googling it, you might as well say Dogelon has a near infinite supply of coins.
Many new investors go all in because they can get several million coins for little money because it's price is as of this writing: $0.0000002712
It's price could never reach $1 with such a massive supply, and the price of the coin is basically worthless.
Remember, the more of something you have, the less it's worth.
Look at Bitcoin's total supply of 21,000,000.
Its current circulating supply is at 18,846,575 which makes this asset extremely valuable because there's not a lot of coins that will be produced.
A short supply and high demand leads to higher prices.
So as more coins are brought into circulation, you know that only 21 million coins will ever be produced.
It's hard coded into Bitcoin algorithm and wont change.
Your local currency (fiat money) is printed from thin air, and isn't backed by much.
The U.S dollar was backed by gold, but everyone knows that's not the case anymore with the removal of the gold standard.
Bitcoin was created to give you freedom from the manipulated control of big banks and government.
It offers a way for you to send money without the need of a central governing body, which means its trustless.
Many investors see Bitcoin as a hedge against inflation.
It's a major store of value, gold 2.0 if you will, that can be easily transported to anyone in the world.
You own your Bitcoin, and in a sense, you become your own bank.
Once the total supply of Bitcoin reaches the market, you can bet to see a Bitcoin valuation of $1 million or more.
Owning just a fraction of a BTC will put you in the top percentile.
Some might argue that Bitcoin doesn't provide much in utility, other than being a store of value because you don't really want to spend it, but that's a discussion for another day.
If you're investing, you want to make sure you know who the people are that's running the show behind a project.
I like to visit the website of an asset and read up on the team members.
Active social media profiles play a big role in my decision making process.
The number of followers a crypto asset has doesn't matter to me as much, as the engagement.
Cardano which is a solid project that's still building out its platform is probably the gold standard when it comes to community engagement.
Charles Hoskinson the founder of Cardano is an extremely passionate visionary who has a reputation of being upfront and transparent with the community.
He was also one of the co-founders of Ethereum.
Cardano is a project that's here to stay that's seeking to solve many of Ethereum's issues.
You know who the founder is, he lays out a step by step roadmap, his team has a strict methodology of how they advance forward, and most of all, Cardano is a trusted crypto asset.
There's a high level of confidence in Cardano and if you take the time to look, it's easy to see why.
According to data provided by Pooltool, a Cardano data aggregating tool, ADA’s total staked value is $42.93 billion, accounting for 71.32% of the $60.2 billion in supply.
Playing It Safe
If you want to play it safe, jump on over to CoinGeko and browse through the top 50 projects by market cap.
The majority of these crypto assets have proven themselves and deserve their spot in the top 50.
Even the top 100-200 is a nice place to find solid projects.
Remember you can't have them all.
Having too many projects in your portfolio can make things tricky to keep track of.
This industry moves very quickly, and because it's relatively young, things are very volatile.
Here today and gone tomorrow are some of the horror stories you might hear about.
We call those rug pulls.
Sometimes things don't work out the way a founder might like.
Always remember, these are companies, and as such they have to operate like businesses.
Team members quit, they run out of money, or the founders are just shady.
You need a stomach that can handle the huge swings in price action, and the patience to endure those storms.
Only invest into what you understand, and know that crypto comes with a lot of risks.
In my personal opinion (Not financial advice!)
Here are some great projects that I've come across that have solid teams behind them which I feel comfortable investing into.
- The Graph
Remember to be vigilant when choosing the right cryptocurrency to buy. There's still a lot to learn and new things to explore.
Don't let the volatility turn you off, volatility is the price you pay for performance.
Have a long-term approach and don't invest more than you can afford to lose.
The upside are tremendous, and the financial gains outrageous.
Bulls make money, Bears make money, and pigs get slaughtered! Don't be greedy.