Three Strategies for Choosing What Cryptocurrency to Invest in Next
You’ve probably thought it at one point or another: “I missed the Bitcoin payday. How do I decide what cryptocurrency to invest in now that I know about the market?”
The bad news: It’s unlikely that any other cryptocurrency will see the same astronomical growth that Bitcoin experienced over the last few years, and impossible to predict it.
The good news: There’s still plenty of opportunities to invest in up-and-coming cryptocurrencies that could potentially bring you 10-100x returns. This comes with a heavy note of caution, because as you may know, cryptocurrencies are incredibly volatile. This is not investment advice, and you should gain/lose money on your own research and intuition.
In this article, we’ll go over some basic strategies you can follow when searching for what cryptocurrency to invest in next. We’re focusing on high risk, high reward options here. If you’re looking for general investment tips, you should check out our article on how to build a proper cryptocurrency portfolio instead.
Scour Initial Coin Offerings (ICOs)
Initial Coin Offerings (ICOs) have quickly become the standard for blockchain startups to raise funding for their project. In an ICO, the team hosts a crowdsale in which you purchase tokens that you can use on their platform. You can also trade these tokens in the secondary market (exchanges) after the ICO.
For example, Golem held an ICO to distribute the first GNT tokens. The purpose of these tokens is to purchase computing power in the Golem network, but traders also buy and sell them on exchanges.
Participating in ICOs can be a lucrative trading strategy. If you invested in the NEO crowdsale (at the time the project was called AntShares), your return on investment (ROI) would be ~160,000% currently. Populous, about 5,000%. OmiseGo, around 4,000%. You get the picture.
ICO gains do come with the highest amount of risk, though. The majority of ICOs will fail, and already almost half have done so already.
It’s important that you do your due diligence when picking what cryptocurrency to invest in pre-ICO. There are a ton of things to look at when evaluating a cryptocurrency, but the most important attributes are:
- Team and advisors – The team should have experience in blockchain technology or at least the industry that they’re targeting. Preferably both. Having reputable advisors is also a strong sign that the ICO could succeed.
- Clear problem/solution – The project’s white paper should clearly define what problem the project is aiming to solve and how the cryptocurrency solves it. Make sure it’s not just a document full of marketing BS.
- Token distribution – The team should be distributing over fifty percent of the tokens to crowdsale participants if not much, much more. Be hesitant about projects in which the team and advisors keep a significant proportion of tokens.
Other things to take note of are: any notable partnerships, whether the team has already created a product, and the size of the industry they’re targeting. All of these things could lead to a favorable investment.
Check Lesser Known Exchanges
Even if you missed your chance to participate in an interesting ICO, you can still invest once the coin hits exchanges. At this time, there’s often a brief spike followed by an immediate dump as ICO investors look to cash-in on short-term gains. This is a prime opportunity to get coins you’re interested in for ICO-level (or even lower) prices.
Beyond the short post-ICO period, you still have time to invest in a coin before major exchanges begin to list it. Decentralized exchanges such as IDEX are goldmines for these types of coins. The same research strategies mentioned above apply to coins in this category as well.
Search through coins with a small market cap (<$100 million) that haven’t been listed on a large exchange like Binance yet. Make sure you research appropriately and find coins that you believe to have solid fundamentals.
Once you’ve found a coin you’re confident in, purchase it, and (this is the hardest part) wait. It could take days, weeks, or even months for your coin to reach a respectable amount of awareness. If you truly believe in the fundamentals of the coin, though, this timeframe shouldn’t matter. Once the coin joins a major exchange, feel free to trade it accordingly.
Time Important Events
Another popular strategy in selecting what cryptocurrency to invest in is to choose coins based on project roadmaps and event calendars. This is a short-term strategy and usually much harder to execute than the other ones that we’ve covered.
The price of cryptocurrency tends to rise after an important partnership announcement or development milestone. If you follow certain projects on Twitter or are active in their Telegram channel, you usually find out about these announcements ahead of the less involved general public.
With that information, you can sometimes buy into a project early and ride the wave up following the announcement. This has some potential downsides, though. Correct timing is incredibly difficult to accomplish. And, in a bear market, even the most impressive announcements can get crushed under the negative sentiment.
Additionally, the rest of the market may not react to the news the way that you expect. A recent example of this is Verge’s partnership announcement. While some supporters saw this as positive news, the majority of the market didn’t, and the price crashed accordingly.
Most importantly, you just need to stay vigilant when looking for what cryptocurrency to invest in. New investment opportunities occur every day when you’re actively looking for them. Join subreddits, follow crypto traders on Twitter, constantly research new projects – in essence, engulf yourself in the blockchain space. You never know what gems you’ll stumble upon.
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ABOUT THE AUTHOR
ABOUT THE AUTHOR
Based in Austin, TX, Steven is the Executive Editor at CoinCentral. He’s interviewed industry heavyweights such as Wanchain President Dustin Byington, TechCrunch Editor-in-Chief Josh Constine, IOST CEO Jimmy Zhong, Celsius Network CEO Alex Mashinsky, and ICON co-founder Min Kim among others. Outside of his role at CoinCentral, Steven is a co-founder and CEO of Coin Clear, a mobile app that automates cryptocurrency investments. You can follow him on Twitter @TheRealBucci to read his “clever insights on the crypto industry.” His words, not ours.