10 Questions to Consider before Investing in Cryptoassets

The aim of this post is to provide a framework for evaluating investments in cryptoassets. With more time, in subsequent posts, I will aim to present a detailed discussion of each of the questions separately.

How to decide in which of the 2,218 public cryptoassets to invest?

Questions to Consider when Investing in Cryptoassets

1. What is it?

• What is the project history and context? How was it founded and developed?

2. What is its value-capture mechanism?

• Where does it sit in the cryptoasset taxonomy?

3. How does the competitive landscape look?

• What market does it try to address? What benefits does it bring versus existing or centralised solutions? Does it unlock any previously unattainable value? Who are the natural buyers of the token?
• Does it have the qualities key to this type of asset?

4. Does it have any moats?

• Does it have any durable strengths?
• How strong are its existing network effects?
• What impact would forking/a new competing network/a centralised company copying the code have?

5. Who are the people directly impacted by it?

• Who are the developers, miners, token holders, investors, enterprises, and foundations associated with the network?
• Are their incentives aligned with token value appreciation?

6. What is the go-to-market strategy?

• What is the go-to-market strategy timeline? What are the marketing and sales strategies?
• Who decides on the strategy? What makes them well-positioned to succeed in planning and executing the strategy?

7. How will the network sustain its lead into the future?

• What resources does the network have to address the changing market conditions?
• How is the network governed? How loyal is the community?

8. What are the key criticisms expressed regarding this network?

• What counter-arguments provide comfort in response to these criticisms?

9. Is it a good time to invest?

• What is the current trading price versus the fundamental valuation?
• How is it trading price versus its peers?
• How does the current price compare to historical fiat- and BTC-denominated prices?
• What is the current market cycle?

10. What is the best way to structure the investment?

• What is the right investment execution approach (including execution timing, position sizes, acceptable execution price)?
• How does this investment impact the composition of the overall portfolio? In what ways does it increase or decrease portfolio risk?

Bonus Questions

• Using a VC analogy, is it a Seed, Series A/B/C, or IPO-level startup?