Look around online and you’ll find all kinds of advice about picking altcoins to invest in. But, to choose the coin that is worth your investment, you need to ask some questions about what it is you want from a cryptocurrency.
Are you seeking a stable project that could produce decent gains on your investment with the lowest chance of failure? Or, are you hoping to put a little money into a high risk, high reward coin and hope for it to shoot the moon? If it’s the latter, you’re obviously going to want to study small market cap coins.
We’re not in the business of giving advice on whether it is better to buy Bitcoin or any particular altcoin, and with so many different obscure projects out there, there simply isn’t the time to outline all the pros and cons of each. Instead, we’d rather provide potential investors with what to look for in a small market cap coin.
Look at the Problem the Coin Purports to Solve
The first and most important thing to consider when picking a small cap coin is whether people will actually need or want to use it. To answer this, look at the project’s whitepaper. Find out the specific problem that the coin seeks to address. Is it simply a means of payment? Is it to be used with a specific application? If it is, what does the application do and is a decentralized, tokenized, blockchain-based solution the best way to achieve the ends set out in the project’s documentation?
Does it Face Competition?
After identifying the problem that the coin seeks to solve, research other projects that are also trying to solve the same issue. Just as Ethereum faces competition from NEO, and Monero faces competition from Verge and Zcash, it’s likely that there will be other coins seeking to achieve similar goals as your chosen project. Of course, the fewer alternatives in the space, the more likely it is to succeed. Alternatively, if you identify other projects that have a different approach to solving the problem, why not invest in both? If you were looking at alternative models for online advertising, for example, you could invest in both Basic Attention Token and ADEX.
Look at the Roadmap
The outline of what a project aims to achieve and in what timeframe they’re going about it can give some clues into the likelihood to succeed or not. If the roadmap seems lengthy and ambitious, like Ethereum’s, it’s likely going to be a long-term hold with huge upside potential. That said, if it’s going to take three years for a team to maybe or maybe not achieve what they set out to, that leaves a lot of time for competition, legislation, or other circumstances to harm the coin’s chances of growing into the space-dominating behemoth you hope it will.
Conversely, projects with big rebrands and other such publicity events can be traded successfully if timed well. NEO’s rebrand in Q2 of 2017 would have provided such an opportunity; however, being a project with solid long-term ambitions, those unfamiliar with trading would have been just as happy with a buy-and-hold strategy over the course of the previous twelve months.
Look at the Team
Browsing a project’s website and analysing their team members is an absolute must when choosing a coin to invest in. Look for those with experience in the space. Obviously, it’s unlikely that you’ll find people with many years of blockchain engineering behind them (they all work on Bitcoin already or are multibillionaires and own private islands). A few years of blockchain experience, a bit of marketing clout, and a few business-minded members on the team are all good indicators. Also, check that the people exist if it’s a smaller coin or ICO you’re considering investing in. A recent example of an ICO that raised nearly $1 million had the audacity to include a fake name with a picture of Hollywood A-Lister Ryan Gosling as one of their employees. Obviously, most cases of fraud aren’t quite this blatant though.
If you do not have enough time for all that research and insist on getting into the crypto game, here are the three coins that seem likely to succeed based on their current performance and fundamentals. We’re not telling you to invest in these coins by any means, but they seem quite stable if there is such a thing in crypto.
Ethereum have massive plans for their platform. Look at the names on the Enterprise Ethereum Alliance. Just about every conceivable industry is represented on the list of the who’s who of global finance and manufacturing. If just one of these end up with products built on Ethereum’s public blockchain and using Ether, the market cap and the ETH to USD price would most likely soar many times from what it is today.
Monero already has a well-defined product and market. It might be a bit seedy but it’s not going anywhere. Over the years, Dark Web market places have turned to Monero to provide their users with even greater anonymity using encrypted messaging and specialist browsers. However, that’s not to say Monero doesn’t have an opportunity for its own moon shoot. Imagine suddenly every cryptocurrency became illegal tomorrow. Watch how fast Monero would rise in price. This makes this coin a great pick as a hedge versus a crypto that is susceptible to legislation (i.e. all of them).
Finally, there’s NEO. NEO makes a good hedge against Ethereum. It offers similar functionality but the bonus of an innovative model to find consensus on the network. It’s called delegated Byzantine Fault Tolerance. Now, this article is much too short to explain what that means in full but the perks to it are it pays dividends just by holding NEO. GAS is used to power smart contracts and the staking reward on NEO is paid in GAS. This can then be traded in for more NEO allowing GAS to accumulate even quicker.
Another advantage NEO has over Ethereum is that it allows decentralized applications to be programmed in any language. Many coders and software developers have their own preferred language, and by including most of the popular languages, NEO team hopes to appeal to a wider spectrum of would-be blockchain engineers. This should help create that killer dApp the platform needs for its market cap to go stratospheric even quicker.
With over 1,500 cryptocurrencies currently listed on Coinmarketcap, choosing which to put your money in is decidedly difficult. We’re sure you’ve browsed social media groups on Twitter or on Reddit and seen countless members of these communities stating “DYOR” (Do Your Own Research). Well, this article showed how you can go about it. Happy investing!