In the previous article, I have analysis the intrinsic value of bitcoin. According to the experience from 2017, the market cap of altcoins also should increase a lot, but in the past year, we can see bitcoin dominance has continuous increase, so in 2021, which investment has higher rewards potential? bitcoin or altcoin?
PS the increase of bitcoin dominance means the real bull market is yet to come, because people still fear of risks, which leads more money flow to bitcoin.
From my point of view, bitcoin has relatively lower risk (compared with other cryptos) with lower return (in a bull market) whereas altcoins have higher risk with higher return. In summary:
if you prefer lower risk, mid or long term investing, and do not want to spend much time on cryptos research, then bitcoin is your choice. Through the past years, bitcoin has formed a strong consensus and thus has intrinsic value, which means bitcoin will not become worthless even in a bear market. Actually, bitcoin's "value store" feature will be more apparent in a bear market, which means bitcoin will outperform most cryptos in a bear market.
if you are actively involved in crypto markets and want to pursue higher returns (also could afford higher risks), then you should pay more attention on altcoins.
Crypto market is full of opportunities, but it also has high risks: most crypto projects are worthless (given there are thousands of them). So if you want to invest in altcoins, how to find a good crypto project? I think you have to consider following aspects, at least.
industry (application area): I like top-down analysis and find the right industry (application area) first, and the possibility of the success of a project will much higher if it is in a right or promising industry.
core team: a responsible team is the premise of the success of a project. Of course, if the team also have strong influence or rich experience in the blockchain industry will be the best, but to me, responsibility is the most important quality of a team.
some team may said that the success of a project depended on the community, not the developing team, and they like to use bitcoin as the example - "bitcoin community is decentralised, and there is no one team could control or lead the community, so whether the projects would success should depends on the community, not the developing team". To some degree, the statement above is reasonable - the success of the projects does depends on the community. But to me, I don't really like the team that make the statement above, because it sounds a little bit irresponsible. Bitcoin community is so unique that almost no other crypto community could compared (at least currently), because the consensus of bitcoin community is formed through many years.
technical advantages: frankly, technical barriers are to necessary to many crypto projects, but with technical advantages, a crypto project will have much higher successful rate (I like the projects with technical advantages).
Marketing ability: compared to technical advantages, marketing ability is more important to the most crypto projects, because currently, many (if not most) crypto investors still focus much more on price increased, rather than the value generated. In other words, many (if not most) crypto investors just care about the price of coins, and that's leads to the importance of marketing: the more widely a crypto project be known, the more likely its market cap could increased (especially in a bull market).
Reminder: given the importance of marketing, lots of crypto projects will exaggerate the advantages or even be a completely scam. So do your homework before investing, especially towards small crypto projects.
If you want to find more valuable crypto projects, which industries are promising and have great investment opportunities within it?
digital gold (value store cryptos): bitcoin is the king in this category, because it has the strongest consensus among all cryptos, with fixed supply feature. Actually, this category do not have much eligible cryptos, and besides bitcoin, BCH and litecoin also have huge long-term value.
public chain: this category is my favorite, and public chain projects have huge value if its ecosystem build successfully. ETH is the king in this category, but does other public chain projects still have chance? I think so, and we could keep an eye on the high performance public chain project. But remember, the success of a public chain not only depend on its technology, but also its marketing ability (ecosystem).
reminder: as the king of public chain, ETH has huge potentials and is very likely to outperform most cryptos, especially in a bull market.
exchange token: exchange tokens are more like traditional financial assets and could easier to do the valuation through traditional methods, because they have solid cash flows. So If you prefer lower risk investments, you could keep an eye on the big exchange's token, including DEX token, such as BNB, HT, OK coin, Uni, Sushi, etc.(DEX token should have higher risk than big centralised exchange token) To evaluate those coins, you should focusing on the trading volume and the burning mechanism (token supply changes).
Defi: the problem of most crypto projects is the lack of real applications, in other words, lack the ability to generate real value. As a value investor, I don't like invest in assets that "hot but lack of real value", so I keep thinking which area could be promising for cryptos, and Defi is one of the most promising area. Defi is a great concept, but please keep an eye on regulations! some ineligible Defi projects may become worthless instantly after government put them into "blacklist".
reminder: Defi is a great application of cryptos, but with the introduce of lending, leverage, mortgage, and other financial concept, the crypto markets may become more volatile, so control the risk and don't invest more than you could afford.
NFT: NFT is another promising area for crypto, actually, I think it could compare to Defi. But this area also involved relatively high risk: the value of NFT is primarily determined by the consensus, and it is also highly related to the NFT project, so its better to choose the right project.
game: game is also a great application area for cryptos, but given the constrain of the current public chain, it's not easy to develop an large blockchain game. I'm not an expert on blockchain games, but as far as I know, the current blockchain game is much "simpler" than the traditional games. The advantages of blockchain game is the incentives, and its very promising to combine the NFT concept with games. Although I've not find a successful example in the game area yet (top 30 or 50 projects), but I believe there will be some great blockchain games in the future.
Of course there are other good applications of crypto, but the basic idea is to see whether it could generate real value with a sustainable business model, and avoid the projects that only have concept, even its hot (if you are an expert in short term trading, just ignore my suggestions). Remember, it's very easy to create a crypto projects with the introduce of smart contract, and most small projects will dead eventually, just like the startups in the real world.
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