Deciding what coins or tokens to invest in

Following up on my previous article (https://read.cash/@BrechtRyckaert/get-started-with-crypto-a-how-to-guide-a5347b05) I'd got a comment asking how to identify coins that are less vulnerable to pump and dump schemes. As this is far from a 1 minute explanation, I figured I'd write an article on it to inform you on how I make that determination.

Disclaimer:

The contents of this post is not financial advice, but purely for educational/informational purposes. I'm not a financial advisor.

What's a "pump and dump" scheme?

Pump and dump schemes are orchestrated buy and sell actions with the intent to push the price of a certain token or coin higher ("pump"), which usually then triggers other buyers and day traders to start buying these too (since they don't want to miss out on the price action/potential profit), followed by a massive sale of these tokens or coins at a specified price ("dump"). This makes the people orchestrating these kind of actions a lot of money, while innocent buyers/traders are lured in and take the loss of value as soon as the dump occurs. This is dubious market manipulation at best.

What I'm holding in my portfolio now

First, let's look into my current portfolio:

• Holo Token (HOT)

• Cardano (ADA)

• VeChain Thor (VET)

• Basic Attention Token (BAT)

• Bitcoin (BTC)

• Bitcoin Cash (BCH)

• Ontology (ONT)

As you can see, there's quite a few alt coins in there. And perhaps even more noteworthy is that Bitcoin only makes up 2% of the entire value of my portfolio, yet Bitcoin is probably one of the safest choices to make when wanting to avoid influence by pump and dump schemes.

With the exception of my Holo Tokens (which is a personal favorite of my, though still very small), I deem all others to be rather safe from this kind of market manipulation. One can never be 100% sure, but once coins or tokens reach a certain scale, it will get a lot harder for people with malicious intent to manipulate the market.

What are my criteria to invest in a token or coin?

There are a few things I look at before investing:

• Market capitalisation

• The team behind the project

• Companies they've partnered with

• Their community

Let's go each and every one together, with some practical examples.

Market Capitalisation

For this I'm always using coinmarketcap.com. This site is very useful to get some datapoints for almost every common coin or token. So let's look into the datapoints that allow us to make an informed decision.

The first datapoint I tend to take a look at is the Trading Volume 24h. I'd like to see at least several million here, but the more the better. This assures us that this isn't a so called "sh*tcoin" with nearly no users or trading activity.

The second datapoint I want to be as high as possible is Market Dominance. This indicates the strength and resistive power of a coin. The higher the dominance, the smaller the chances of manipulation. Obviously with Bitcoin thi

The last datapoint I take into account is the Market Cap. Again, more is better when it comes to this kind of value. Avoid low cap coins or tokens, as they are easily manipulated.

The team behind the project

This one requires a bit more research, but I tend to do a background check of the folks involved with the token or coin. Let's take Basic Attention Token as the example here.

On https://basicattentiontoken.org/team/ they have a great list of the team, making it easy for us to check their backgrounds. While checking their profiles it quickly becomes obvious that a lot of them used to work at Mozilla, just like the CEO. While this isn't a guarantee for success, it does tell me they have the experience to make the Brave Browser work.

Companies they've partnered with

Another factor I tend to check is who's cooperating with the project. Who are their partners? Again, nothing completely decisive but it does help to get a general feel for the validity of the coin or token. Big names in the industry tend to require severe audits before partnering up with a project and their coin or token.

In this case we'll look at VeChain, where PriceWaterhouseCoopers (pwc.com) has partnered up with VeChain to use their blockchain technology. This is exactly the kind of larger name in the industry that you want to see teaming up.

And last, the community

The final factor I check is what the community behind the project is like. This might even be your best means of verifying if there's a lot of potential for manipulation.

Let's take Dogecoin as the (probably) best example of a somewhat dubious following. When the better part of your community interaction is posting "Doge to the moon" and such, I tend to skip your coin all together. I very much like the community behind Holochain and the Holo Token (HOT).

They have very frequent blog updates, local dev meetups and online sessions. This is pretty much the opposite to my experience with Dogecoin. Hence that's why I hold quite some HOT.

I hope this was useful to you. All the best.

Brecht