How to perform your own due-diligencebefore investing in CryptoCurrencies?
One key lesson from Jim Rogers on investing is to do your own thinking. This article will help you understand cryptocurrencies. If you are an altcoin investor (An Altcoin is a cryptocurrency which is not Bitcoin), fundamental analysis will help you choose the ones with long-term potential.
All investments have pros and cons. A Cryptocurrency investor needs to look for the cons first, as some are definite deal breakers. If they exist, it is not worth investing more time in researching the crypto-currency.
Finding the right information about Crypto-Currencies is challenging because:
What are the core reasons to invest in an Altcoin?
The fundamental reason for a cryptocurrency such as Bitcoin or an Altcoin to exist is to serve its users, the only reason why users will engage with an altcoin is, if it is solving a problem they have. Some Altcoins promise to solve problems we did not know we had, for example, LBRY is creating a pay-to-view content system, while others such as Crown Coin, Dash and deCRED are variants of Bitcoin. They are solving the same key problemin different ways. An investor needs to predict who will be the best at it.
Others like EDC and iEx.ec are bringing blockchain or decentralisation to problems which have been addressed by centralised solutions. For an Altcoin to have the wind blowing in its sails, it needs to get the very basic core mission both right the functionally, the context and the timing right.
Branding, Marketing and Visibility:
If they do not know about you, you do not exist.
Marketing is everything. Without knowing about a solution, how can that solution be applied to a users problems? Marketing is about informing the market of the solution.
Branding is about the trust between the Cryptocurrency and its potential investors first; actual users usually will come in later. A hyperinflation ultimately occurs because the users of a currency lose trust in it, but the inverse is also true. Hyper re-valuations (Manias?) occur when many new investors want to buy in the belief that the actual users will come in later.
Re-branding is not an uncommon thing in the crypto space, as an altcoin goes through periods of maturation so does its brand image. Frequent re-brandings are a sign of frequent changes of strategy (or trying to hide something). Frequentand recent re-brands throughout an Altcoins life are not a good indication of future strategic decisions.
Positive mentions in crypto-media outlets such as Cointelegraph.com, CryptoCoinsNews.com and Altcoin Reviews all add credibility to Altcoin when discussed in positive terms.
More street cred is accumulated when the media mentions are outside of the crypto universe. Editorials and articles in Forbes, Bloomberg, Nasdaq add more authority and credibility to an Altcoin. Coverage in general newspapers and news media are indicators of mainstream interest.
Altcoin Social ProofHow many other investors/users believe in the project?
This is one of the most important metrics to evaluate a cryptocurrency as it is the results of all the other metrics combined.
Coin market cap or the total value of a crypto-coin is also a form of social proof. The total value of a coin is the result of investors voting with their wallets for the coin or against.
Cryptocurrency developers and spoke persons, give a face to the project, they consolidate information and can be the champions and evangelists. Spreading the idea and solution to the masses. Any U-turn by these coin champions can have serious adverse effects on the coins value. These spokespeople become key influencers because naive investors delegate their thinking to them.
When high profile coin spokespersons jump from one bandwagon to other many investors could follow and the results could be cataclysmic.
Altcoin development team and technology
The core value of any project is the functionality of the coin. (and how many people know about it and trust it)
Bitcoin has proven itself over and over again, although many have sung to its obituary. Most Altcoins have either modified the Bitcoins block chain code or created an entirely new blockchain tech.
New technologies bring new risks. For example, the now famous DAO hack was the product of a bug in a new smart contract technology. Such breakages in the technology can have different impacts. The DAO was destroyed, but in other instances, it serves as a resilience exercise.
In general when something in the cryptocurrency ecosystem breaks down it does not help the cryptocurrency investor as mainstream adoption is postponed with each of these negative events.
Price, Market and Exchanges
AD: Want to learn more about cryptocurrenciestry: Cryptoversity
Altcoin pumping and dumping:
Altcoins usually have a core following which are true believers in the project. These believers are a mix of the founders, developers and those with a vested interested in seeing this coin flourish either ideologically, or for monetary reasons. These groups will promote the pros and try to find solutions to the cons.
There will be other groups who market more the disadvantages of a specific coin over the advantages. This group will be made up of believers in the competing coins and those who missed out on the ICO or buying the coin at lower prices.
Some pumps are focused around a certain new feature being released others can be more structural such as regulation changes, a breakdown or an increase in the competition.
Trying to follow the pumps and dumps is the job of the market makers and the day traders. Other investors choose, not to roll with that roller coaster and focus on the long term fundamentals of the cryptos.
Malicious market makers, pump and dump coins while they skim money from both the greedy investor and the fearful investor. The pumps take placethrough a hype, promises and fear of losing out.
Some pumps are phenomenal for example between Jan and Feb 2017 Dash doubled in price. Such a rise in price needs to be sustained to be of any value to the buy and hold crypto investor. If the prices go up and then comes crashing down, investor confidence erodes each time this takes place.
Can the price of a crypto-currency be manipulated easily by external agents intent on causing harm? This question is more important in the future than today, when investors will be able to invest in cryptocurrency ETFs. When these are approved by the SEC, these ETFs can be used to do naked short selling. This system allows speculators to bet on the downside of a coin, this is done without owning any of the actual coins hence the term naked.
The economics of an altcoin, determine the supply side of the coin. Coin founders amount to the FED of that specific coin, their behaviour needs to be scrutinised as much as that of any central banker!
Within the history of an altcoin, investors can potentially find the virtues, tantrums and the seeds of greatness or otherwise. To go into an Altcoins history,investors need to define what is an Altcoin first.
To me, an Altcoin encompasses the mindset of the founders, the whitepaper, the connection and interaction between the market and the Altcoin developers.
Some Altcoins are scam coins by design, others have good intentions but are implemented badly or too weakly, or the competition is too overwhelming. The past is no guarantee of the future, but the futures foundations are laid down in the past.
Crypto-Currency Regulation challenges
Regulators have the power to destroy the viability of a cryptocurrency overnight, at least within their own borders. Indeed cryptocurrencies are somewhat resilient to such an attack because of their decentralised design. However, the owners of such cryptocurrencies are not. Probably 99% of cryptocurrency holders are good, law abiding citizens.
If a cryptocurrency is declared, investors holding it will probably dump it. The risk to themselves and families will be too high and impossible to mitigate. There are some variables which increase the power of the regulators and the likelihood of being targeted, for example:
Does an altcoin:
Regulation can also ake an altcoin stronger:
Regulators of particular jurisdictions which maintain the status quo or openly accept BlockChain technology push cryptocurrencies more in the mainstream.
Private forms of public blockchain oversight such as companies which monitor blockchains for illicit activities help regulators and discourage illegal use of cryptos. Others firms rank ICOs (Wings.ai, IcoRating ) and this helps private investors make informed decisions.
Another school of thought considers that all forms of impediments thrown at a cryptocurrency only serve to make it stronger. Cryptocurrencies will evolve and change shape to either outsmart, evade or adopt to regulators. Regulations will act like natural forces which will take the weak out and make the stronger more resilient to outside influences.
Regulators have issues with anonymity, and not privacy, blockchains by default provide privacy, and some cryptos build layers of anonymity on top, this is where regulators are most likely to clash with altcoins. If Altcoins are the new Panama, Governments will do everything in their power to stop their use as illegal tax avoidance vehicles.
Scam Warnings from regulators and rating agencies.
Some governments have issued notices concerning particular cryptocurrencies; this is a sign for investors that such coins need closer scrutiny especially when such announcements target a specific Altcoin rather than the who crypto space.
Investors should take a much deeper look at this altcoin, both because of the regulatory threat itself and the possibility that the altcoin is an outright scam or has MLM (multi-level marketing) or scam like tactics/mechanics.
Centralised / Decentralised Network and Governance
Centralised / Decentralised are attributes not adjectives. Some attribute centralised, to bad and decentralised to good. Given the spirit of liberty and autonomy in the crypto space, this is a common misconception.
These two attributes have both their pros and cons.
Centralization brings the perils of cult figures and centralised points of attack, but they also bring the benefits of better coordination, deployment of resources and central points of contact for support and media.
Centralisation of development could be a threat to currency. For Example, Monero an anonymous crypto-currency has a public spokesperson. In a recent podcast, he statedthat he was worried at times being too much in the limelight. If someone wants to lash out at a certain crypto, the people who are the face of that crypto make prime targets.
deCRED has a decentralised development structure, and this gives it strength regarding towards expanding its functionality, but it is more challenging to integrate code coming from different developers.
Most of Crown Coins developers are anonymous; this gives potential entities who would like to disturb the coin network much less of a clear target. However, it also brings a question mark about the reputation and expertise of the devs. Having said that, they are very accessible through their slack channel.
Centralised / Decentralised Infrastructure.
A lot of Bitcoin mining power is located in China. Miners swarm around cheap sources of electricity. These mining clusters can create weak links in the blockchain as it opens the hashing power up to attack. Especially within jurisdictions vulnerable to state interference and failures of infrastructure points.
Other points of failure include service nodes, master nodes, super nodes, exchanges and other critical infrastructure points which maintain the coins value and the ability of users to exchange the coin or use it.
The Future of Bitcoin or the Altcoin
Investing in cryptocurrency can be done by following the momentum and technical analysis of charts. Does this work? Different people have different levels of success with such strategies, the fundamentals approach to investing has worked for Warren Buffet andthere is no reason why it should not work in for cryptocurrency investors. In addition to fundamental analysis dollar cost averaging is alsoan important investing strategy. Buy low and Sell High!
Tips: Sponsor my addiction to tea and biscuits!
Any comments and help to improve this document would be grealty apprciated.
AD: Want to learn more about cryptocurrenciestry: Cryptoversity
Go here to read the rest:
CryptoCurrency Investing: Research and Due-Diligence ...
- Crypto Analyst: Ethereum, XRP and Altcoins Poised for Major Rally As Bitcoin (BTC) Dominance Drops - The Daily Hodl - November 18th, 2019
- Bye-Bye Bitcoin? Why the Altcoin Bottom is In - newsBTC - November 18th, 2019
- Proof of Stake Creator: Bitcoin Unlikely to Dominate Altcoins in Long Run - Ethereum World News - November 18th, 2019
- Best Bitcoin/Altcoin Wallets For iPhone [2019 Edition] - October 1st, 2019
- Crypto Conundrum: Bullish Bitcoin Price Action Halts Altcoin ... - April 24th, 2019
- Altcoin Season 2019 Thrives: Everex (EVX) Leading Binance ... - April 21st, 2019
- What is an Altcoin? - CCN - February 9th, 2019
- Altcoin Trader South Africa - ice3x Altcoin Exchange ... - February 2nd, 2019
- Altcointrader.co.za Review - Altcoin Trader, Login ... - January 27th, 2019
- Bitcoin History Part 5: A Wild Altcoin Appears - Bitcoin News - January 9th, 2019
- Latest News on Altcoin | Altcoin Breaking News | DC Forecasts - January 9th, 2019
- Altcoin Daily Preview: Tron (TRX) Could Bounce back ... - January 9th, 2019
- Most promising Altcoins and ... - Captain Altcoin - January 8th, 2019
- Altcoin - Investopedia - December 12th, 2018
- GoChain (GO): Here's Why This Altcoin Might $GO All The ... - November 10th, 2018
- Find The Best Bitcoin, Altcoin, or Multi-Cryptocurrency ... - November 10th, 2018
- Altcoins Explained | The Best Altcoin Guide for the Beginning ... - October 3rd, 2018
- Altcoin.io | The cryptocurrency exchange of the future | Wefunder - September 30th, 2018
- Android Bitcoin ~ Altcoin Price Ticker ~ Coin Maker - September 4th, 2018
- 7 Altcoin Exchanges Without KYC & AML - CoinSutra - August 22nd, 2018
- Altcoin News Archives - Ethereum World News - August 7th, 2018
- How to Choose Which Altcoin to Invest In? - Coinidol.com - August 7th, 2018
- Altcoin News | Altcoin News today | Latest Altcoin News - July 27th, 2018
- USING ALTCOIN TRADER - rsainvestments.blogspot.com - June 24th, 2018
- Guide: Compiling an altcoin daemon in Ubuntu Linux ... - May 31st, 2018
- Top 3 Altcoin Trading Exchanges - [Reviews and Ratings] - May 27th, 2018
- PacCoin VPS Masternode Guide AltCoin Guide - May 12th, 2018
- Asian Cryptocurrency Trading Roundup: Top Altcoin is Tron ... - May 10th, 2018
- Alternate Cryptocurrencies aka altcoins r/altcoin - reddit - May 9th, 2018
- Garzik Forks UnitedBitcoin Away from "Maximalists" to Support Altcoin ... - April 13th, 2018
- Bitcoin, Altcoin and Cryptography explained - April 4th, 2018
- ZClassic and the Bitcoin Private fork : altcoin - March 4th, 2018
- Altcoin Trustworthy Decentralized Cryptocurrency Exchange? - March 4th, 2018
- Blockfolio Bitcoin Altcoin App on the App Store - March 4th, 2018
- Morning Asian Altcoin Trading Roundup: the leader is Tron - February 28th, 2018
- Webinar: Bitcoin Overshadowed by Altcoin Surge - Nasdaq.com - February 12th, 2018
- Bitcoin Mine News Bitcoin & Altcoin Mining & Trading News - January 7th, 2018
- Ethereum, Litecoin Prices Headline $20 Billion Altcoin Rally - January 7th, 2018
- What is an Altcoin? - CryptoCurrency Facts - January 4th, 2018
- What is an Altcoin? - ccn.com - December 20th, 2017
- Trading Bitcoin for an Altcoin Won't Shield You From the IRS ... - December 20th, 2017
- Buy or Sell Bitcoin, Litecoin, Altcoin Multi Crypto Currency ... - December 20th, 2017
- Altcoin Exchange Performs First Atomic Swap Between Bitcoin ... - December 6th, 2017
- GitHub - ander7agar/altcoin-rpc: A modern Bitcoin Core REST ... - December 2nd, 2017
- Altcoins - BTCMANAGER - November 28th, 2017
- Markets Update: Bitcoin Bull-Run Primes Altcoin Markets for ... - November 25th, 2017
- Altcoin Exchange, the Decentralized Cryptocurrency Exchange ... - October 17th, 2017
- Altcoin Watchlist | Meet & Learn Cryptocurrencies - October 4th, 2017
- ATC Coin Review: ATCC altcoin with massively inflated ... - September 5th, 2017
- JRM Altcoin Update - Quit chasing the headlines! - YouTube - September 4th, 2017
- Bitcoin Cash Statistics Confirm BCH is Just Another Altcoin - Live Bitcoin News - September 2nd, 2017
- Which Altcoins to Buy This Week? (31st of August, 2017) - Live Bitcoin News - September 1st, 2017
- OpenBazaar Developers May Introduce Altcoin Support in the Near Future - The Merkle - August 27th, 2017
- Exante launches XAI, the world's first altcoin fund - GlobeNewswire (press release) - August 25th, 2017
- ALTCOIN | Bitcoin Insider - August 23rd, 2017
- Altcoin Forum - Alternative Cryptocurrecies Location - August 23rd, 2017
- Op Ed: Drivechains Could Kill Off the Altcoin Market - August 22nd, 2017
- Nakamoto Institute Daniel Krawisz: I Don't Like Altcoins, but I Like Forks - Bitcoin News (press release) - August 22nd, 2017
- Bithumb, Highest Volume Exchange Globally, Adds Monero - Inside Bitcoins - August 22nd, 2017
- One-Man Band To Create The Second Altcoin Forum In The World - Coin Idol (press release) - August 18th, 2017
- When altcoin life imitates art - FT Alphaville (registration) - August 14th, 2017
- ALTCOIN CAPITAL - Trusted Crypto Traders - August 12th, 2017
- Overstock Now Accepts Various Altcoins for Payment - Including ... - Bitcoin News (press release) - August 10th, 2017
- What are Altcoins and ICOs Bitcoin Whiteboard Tuesday - 99 Bitcoins (blog) - August 9th, 2017
- Cryptocurrency Symbol BCC Belongs to BitConnect Coin, Not Bitcoin Cash - Markets Insider - August 8th, 2017
- Crypto-Startup Hubcoin Announces Distribution of Pre-Mined HUB to Altcoin Developers - Bitcoinist - August 3rd, 2017
- This Altcoin Is Ready to Challenge Bitcoin's Domination of the ... - Futurism - July 31st, 2017
- Beginning of altcoin's end: US signals digital coins may be subject to federal securities law - CalvinAyre.com - July 31st, 2017
- All Major Indian Exchanges Reject Bitcoin Cash Completely - Live Bitcoin News - July 31st, 2017
- Global Advisors Launches ICO and Altcoin Closed-End Private Fund - Finance Magnates - July 31st, 2017
- USING ALTCOIN TRADER - rsainvestments.blogspot.co.za - Google - July 9th, 2017
- Payza Commits to Cryptocurrency: Unveils Full Bitcoin Services, Introduces Altcoin Exchanges - CoinDesk - July 7th, 2017
- What is an Altcoin? Bitcoin Magazine - July 7th, 2017
- CryptoPing completes $2.5 million ICO to further develop altcoin trading intel bot - CryptoNinjas - July 4th, 2017
- Saturday Slump: Ethereum, Bitcoin Prices Headline Crypto Market Downturn - CryptoCoinsNews - July 1st, 2017
- Monday Massacre: Bitcoin, Ethereum Lead the Way as Cryptocurrencies Retreat into the Red - CryptoCoinsNews - June 26th, 2017
- Altcoin signal app CryptoPing set to conclude ICO with over $1m already raised - CryptoNinjas - June 25th, 2017
- EasyMINE: Altcoin Mining for Everyone - Coin Idol (press release) - June 22nd, 2017
- Altcoin 2017 Forecast: Litecoin (LTC), Peercoin (PPC ... - June 18th, 2017
- Which Altcoins To Buy This Week (16th of June, 2017) - Live Bitcoin News - June 17th, 2017