Researching Altcoin Gems - My Screening Process
A Process Of Elimination
Identifying altcoins, and especially micro-caps, that are primed for future success can be a lengthy process, especially if you are going to go about it correctly. This is often a process of elimination. If a project fails to rank well enough, in particular areas, I tend to overlook it. This is especially true of micro-caps. This is an already challenging and dangerous environment. The risks are already high. There is simply no room for carelessness and irresponsible decision-making.
Even when making well-informed decisions, there is a strong possibility of failure. That’s simply the nature of the game. To protect my investments, and simultaneously provide myself with the best odds, there are a few key aspects I tend to focus on. Ensuring that the majority of these boxes are ticked provides a level of confidence, as well as a form of “validation” to at least initiate a rather modest investment.
Volume
One of the most important aspects to consider, especially concerning smaller projects is that of volume. Firstly, there has to be enough daily volume to exit a position on short notice. This also has to be a consistent daily volume and not merely an isolated case. Strong, or at least sufficient liquidity is imperative. A smaller project requires low liquidity to moon. However, there still needs to be a healthy ratio in place that can provide upside, while simultaneously offering sufficient liquidity.
Secondly, the volume needs to align with the market cap of the project. Having sufficient exit liquidity is essential. However, it needs to be accompanied by a healthy market cap/liquidity ratio. Essentially, this speaks of a healthy project. Healthy volume signifies demand and relevance in the marketplace.
Relevant Partnerships & Case For Adoption
This is always an area that can have a huge impact on any project, provided the partnerships or associations are significant enough. Together with partnerships comes that of the team. Depending on who’s involved, as well as the backgrounds of those involved can have an enormous effect on how the project is perceived and received by the market. This can also be an enormous catalyst, especially if the market is still unaware of the project.
In other words, once there is recognition, coupled with the knowledge of a strong partnership, the project is likely to rally. A good partnership can also aid in adoption. This all tends to come under a single banner. It’s very much a case of who and what are affiliated and part of the project. This is an area that requires investigation, provided there is a little meat on the bone.
Relevance & Use Case
This is another critical aspect to consider and explore. Is the project relevant, and does it have a significant much-needed use case? Whenever a project is launched that simultaneously solves real-world issues, there is always a strong chance of success even if it is temporal, prior to newer projects entering that particular niche and dominating that sector of the market.
This aspect, in particular, is what has motivated me to discover some alternative layer 1 chains. I believe alternative layer 1 blockchains are on the rise, and that there will be a significant adjustment in terms of credible layer 1 chains ranked within the Top 50. It’s also somewhat likely that certain layer 1s will attract the building and development of rather particular projects and applications.
Availability & Exposure
Along with the aspect of volume comes that of availability in terms of exchange availability. I like to see a good few options in terms of CEXs, as well as DEXs. A single exchange listing is a problem. If something goes wrong, it’s a major issue and can bring all trading activity and liquidity to a grinding halt. Healthy volume across several exchanges always helps to bring about and trigger investor confidence.
I have seen many projects wither and die shortly after being removed from certain exchanges. This is especially true if the exchanges in question are the primary exchanges where the majority of trading is taking place. This is an aspect that shouldn’t be overlooked, especially since exchanges remain in a somewhat uncertain predicament, in terms of regulation and operations. Many have shut down simply to avoid regulatory headaches and ongoing scrutiny.
Final Thoughts
These are some key aspects I tend to focus on, as I seek to uncover the success stories of tomorrow. Depending on what I discover, this can sometimes be a rather lengthy process. I like to consume a significant amount of data and information, to “get a feel” for the project. This usually results in me establishing a level of conviction. When you spend enough time researching something, eventually, it resonates or falls to the floor.
I tend to push on until either outcome manifests. This way, I am satisfied, regardless of whether my sense turns out to be accurate or not. The consumption of data either builds a case or sends out a warning. I have found this to be a rather trustworthy approach. Anyway, that’s it for this one! Catch you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
