Finding The Unicorn — A CryptoCurrency Investing Guide
I’ve been investing in cryptocurrencies now for close to a year and during this time I’ve garnered a fairly good portfolio which has grown substantially. During my time in the crypto sphere, I’ve developed what I would like to call my ideal process for finding the unicorn, of course by unicorn I mean the ideal coin to invest in for excellent returns. Below I’ve gone into detail my exact process which I undertake before investing in a cryptocurrency.
In order to find the ideal coin, you have to start out by researching the market and the coins available to you. There’s a few ways to go about this and utilizing an array of methods is often the best way to go, but it’s important to understand how each one can benefit you and the dangers of each method.
Benefit: Finding Community Interests
Drawback: Biased Information
Community sentiment is great as it indicates what coins are getting popular and traction among groups of people at the end of the day it is people who buy coins and the crypto world doesn’t always work within the realms of logical facts, hype and FOMO can often be the cause of direct currency market gains. It is also worth noting that you should be skeptical when reading information posted by others as more often than not they are biased to the coin they share since they will be invested in it. In order to find coins that have interested others, I’ll Go To Various Reddit Pages:
Straight From The Source
Benefit: Information From The Creators
Drawback: Can be Biased
One of the best ways to get information from the creators is through Bitcointalk as developers will often post their ideas and announcements through these threads, it’s a great way to find projects that are not too known or marketed, getting you in on the ground floor. It’s important to be careful here as developers like community members will be biased to their creation. View this information with a pinch of salt!
Once I find something I like the look of or if I haven’t found anything I’ll go to www.coinmarketcap.com and either check for coins or search the coin I have found in step one. At the end of the day it is the coin and market fundamentals which are crucial for investing, you need to ensure that the coin can grow and net you a great return on investment (ROI) and in order to do this check for the following:
I aim for investing in coins under a 100 Mill cap as this guarantees each coin can reach a healthy amount of growth, this is my personal sentiment because many people will invest in coins with a larger amount but my model is adapted to my type of investing. A total circulation gives you an indication of what values each individual coin can reach an example is provided below:
Coin A: 1 Billion Coins | Market Cap 100 Million = $0.10
Coin B: 100 Million Coins | Market Cap 100 Million = $1
Now whilst both are as popular as each other, due to the sheer cap with coin A, the price is 10x less than coin B. Therefore it is often very unrealistic to get dollar plus value through a currency with over a billion coins in circulation.
Market Cap should be checked to see how popular it is, at the end of the day you need to be able to determine how much growth the coin has left in it, a coin at 100 Million market cap has far more growth possible and room to double in price than a coin with 1 Billion market cap as this would be much harder although not impossible.
Industry Market Cap
I then check the market cap of the industry that the coin aims to disrupt. For example one of my favourite tokens on the Ethereum blockchain is DigixDao which aims to tokenize gold through their DGX tokens. I know that gold has rougly a $7 Trillion market cap, so I know that is Digix captures a percentage of this then the coin will have superb growth. If I believe the coin has necessary use case then I calculate the potential price of the coin to see future growth opportunities.
I’ll do more in depth research on the coin via their website and whitepaper, really engrossing in the tech and making sure everything adds up, check for buzzword usage and be cautious. The whitepaper is a great sign of how well the team has prepared the project and how they are projecting it.
A typical whitepaper should feature a summary of the project, the team behind it, the road map and the technology being implemented as well as how the team aims to make this a reality. Failure to incorporate any of those elements into the white paper often prevents me from investing.
It’s imperative to research and find out all you can about the team as they are the ones who will be bringing the idea to life. Team members you should check out include the ceo, cto, devs, support groups etc.
LinkedIn is good for this as it provides all the details of people’s backgrounds and their knowledge in the industry. You need to make sure they have a good team, a good concept cannot be brought to fruition without a good team and will fail accordingly.
Now it’s time to find the competitors, really do your research on coins performing similar or same operations, have an eye on those targeting the same industry as they may cut a percentage share of the market cap from the project you are researching and you may end up finding a coin that’s better!
Especially in today’s crypto world, there are many projects all vying for the same industries all thinking they can do a better job than the next. This is why research is so important because a coin can be make or break if depending on the competition.
Check the community sentiment, see what people say, sometimes they’ll find something you overlooked or missed and at the end of the day it’s people who buy coins, regardless of the technology.. you need buyers and demand or else the coin is worthless. A great example of a good community is PIVX, they quickly rose up the rankings purely based on how the community operated and drove the idea behind the coin. They all believed in the coin, creating content and marketing to push them further up the listings.
If everything adds up well enough, I’ll invest. It’s important to determine how long you believe ROI will be and make sure to highlight an exit point. Personally I believe in scaling exit points. I.E 10% of my stack will be sold at 100k sats, 30% at 150k, 70% at 200k and so forth so that you get continual secured profits from the coin. When investing it is important to have sensible diversification, a perfect balance between distribution and accumulation of each coin is important so that maximum gains can be made. Generally if I make a lot from a certain coin to the point where it is heavy in that coin then I will split this to balance the portfolio once more.