With stories of people becoming millionaires overnight after investing in a cryptocurrency, it’s important for me to hold myself back from getting too infatuated with a crypto and invest like crazy.
I make sure that every investment I make, especially in new coins, is based on the right foundation.
While I’m not a financial advisor, I use the following strategy and it has been working for me so far.
1- I evaluate whether or not there’s a technological need for the blockchain component or coin.
2- I try to find out as much as I can about the management.
Do they come from a background of creating cryptos? Have they demonstrated a technical superiority over their peers? For example, the creators of Polkadot helped build Ethereum, giving this newer altcoin greater legitimacy.
If I trust the person, there’s a better chance I will trust the technology.
That doesn’t mean that some important technology won’t come from some unknowns—after all, almost everyone was an unknown at some point. To this day, no one knows who Satoshi Nakamoto is.
If I like a coin developed by someone who doesn’t have a long track record in the industry, then I require a higher bar for the technology.
3- I differentiate the face of the company from the developers
When looking at an altcoin that has the blockchain company behind it, I expect different things from those on the business side than I would from the developers.
Some leaders concentrate on the technology that they have their hands on, leaving others to build the business.
For other leaders, they focus on growing the company. When considering this group, it’s about looking at the startups that they’ve already developed, proving a track record of success.
I want to see both types of leaders within these companies, since both areas of the business have some major technological and business milestones to reach before they find long-term success.
Then, there are the influencers. Those who are prominent investors and thinkers in the space. They help shape the future of the coin through their ability to conceptualize what’s yet to come and what might influence policies down the road.
Knowing where they invest—or understanding where they’re looking next—can provide clues on how the cryptocurrency market is moving in the future. The Winklevoss twins are an example of this.
Now, what happens if I believe in the technology and what it stands for but I don’t like the influencers behind it or some people in the management?
What if I find out if people I trust don’t respect them or like them?
They drop down to my waitlist.
If I find a coin that ticks all the items on my list, I go for that. There are a lot of coins being developed out there and I would rather bet my cash on the ones I truly believe in.
Is it possible that the ones I passed on eventually find success? Yes, but that is true in any investment. Even in the market. There are stocks I passed on that eventually became a big player.
But I have never bet on a coin that has failed.
As you go deeper into crypto, you will come up with your own standards, your own process.
I hope that what I shared will help you fine tune yours.