Topic: Criteria for Evaluating Potential Cryptocurrencies for Investment in the Market: (Read 266 times)

honestly, I think it is very hard to know whether new project or already running project is good for investment or not. at least there are two challenge for us as investors. first, we don't know if the project will be success or not?, is market need it?, is it can go for long run?. second, is this project will become a scam project or not? as there is no guarantee in it. based on my experience, the new project that will be successful are always contain of many great people who have great skill, experience and capital to start. I become bounty hunter since long time ago, and I realize that many successful project have money to pay their campaign participants with BTC or ETH, so they are not just start with web developing skill or other programming skill but they already have good fundamentals as company.

in short, keep up with yourself about the project that you will venture with. these people can change their plans in a heartbeat depending on when they will see the opportunity to get out with a lot of cash.
investing on any of these projects will require your due diligence to avoid possible losses. get some hints also from their social media channels. get out when your instincts is saying that the team is about to abandon the boat they are in.

I assume that any new cryptoproject is a lottery, since most projects are given funds without any official declarations, so for any cryptocurrency there is a chance to become a good investment. Usually the factors you listed strongly influence the success of the project, but sometimes there is a chance to make profit out of not so popular projects...

Be sure to reverse search them and it would be better to contact them in the contact address that they provide, only for you to verify if they are real people or not. A team can be trusted but it does not mean that they can now perform well forever. Also a project which had some partnerships, does not mean that they are really great, but some only had a money and they use it to pay those brands to partner with them.

We can still benefit on their temporary hype if we are early to invest on them. As for the tokenomics and such, there is also no guarantee that what is written are accurate and will be followed by the team, so always take time to check them properly and monitor them or your assets from time to time.

You are not far from the truth. Altcoin investments are not what someone should put hope in or believe in the words they say or promise. Their motto is to promise and fail and give unnecessary hope without fulfilling it.
Investing in altcoin is totally on luck. It is risky to invest in altcoins based on the words and promises they have made to their community. The altcoin owners might have good utility and plans for their project but the fulfillment of their project goals that's where the problems lie. Because they only care about your investment money, not about delivering the project.
The best thing to do is invest more in Bitcoin, if the need to invest in altcoin arises, you can try your luck on top altcoins you find yourself convinced about.

How was this thread allowed to be published in researchgate, I will talk about two reasons to make it clear that they are not criteria for evaluating.

• The market value is not a reason for classifying Cryptocurrencies as good or bad, but continuous growth may be a good indicator. The market value can be manipulated by offering more tokens or burning them, and both of these things are present in the tokens, so you find that it suddenly becomes among the top 100 cryptocurrencies and suddenly loses billions of its market value.
• The development team has a reason to describe the project as good, but as much as that, what is more important is what they are trying to develop. Some good developers take advantage of their reputation, which makes people trust this project and it is a scam.

I personally prefer to look at Dev Teams and partnerships in developing projects. Because after all, a trusted team that is an expert in their field is very important. And what's more important is the partnership. Because projects that are of good quality and have good potential will usually also have quite a lot of partnerships. especially if it's a partnership with a very influential party in the crypto world.

after that only later did i start looking into tokenomics and such. Even the vestiny system and such are also important to note. Because every vesting there will definitely be a change in price and usually it is a decrease.

I'm afraid this is an old standard that doesn't apply to today's crypto setting anymore. I used to adopt this. I used to give it to others as an advice as well. In the end, I've got a shitload of shitcoins in my wallet that don't have worth.

This was a seemingly perfect advice way back in 2016-2017 when the ICO craze was at its peak. The big failure of that ICO moment proved that this set of advice is actually irrelevant in real life.

The primary criteria is decentralization because crypto started and became big because of it. Bitcoin is the only truly decentralized coin to invest.

I believe that's not the main point. You see, each individual possesses a varying degree of investment motivation. The stronger one's impetus to engage in investment, the more they'll seek additional reasons to partake in ventures for the sake of profit.

However, for those who have not contemplated investment and exhibit no interest in it whatsoever, they will muster a plethora of rationales to decline such undertakings. This implies that fostering the desire to invest must take precedence, enabling them to subsequently assimilate the considerations for adopting appropriate investment instruments.

Novel investment approach methodologies wield a considerable influence over others, piquing their interest in investment and catalyzing an intrinsic motivation for financial involvement. Subsequently, the criteria delineated by the original poster (OP) metamorphose into a body of knowledge for their benefit.

TL:DR;
a. first check a coins cheapest minting/mining/acquisition cost on planet.(wholesale/value)
b. compare to market(speculative retail price)
c. if there is a wide % margin between a & b then look at the community/features and reason for possible gap
d. also look at if price is independant from other markets.
e. if speculative market spread is high then its at a premium so not a good time to buy

long winded version:
decades ago i used to do share trading. in which there were two markets (theoreticaly) the blue chips vs the penny stocks

today we have the mainnets vs the crapcoins

bitcoins dominance is not just the speculative assumptions of features and utility. its the base value caused by the minimum mining cost which increases steadily to give a bottom floor value line to which the market then speculate above it

yes there are some other PoW coins which exist but their halving cycles and miner populous is low which is why their market are low

there are also some silly (now) PoS which have very little underlying value(minting cost) YET have a very high speculative market % (EG ethereum) where this speculative market % is held up so high due to its market pegging the market movements of bitcoin(via arbitrage). which. can break and cause the crapcoin market to plummet if the speculation dies

so in short the PoS markets of high speculation have a deeper hole to fall down if speculation fails. where as PoW has a saviour in the form of the underlying value of most efficient mining/acquisition cost of coins supporting a bottom to hold it up..

if looking at any coin. look at the underlying efficient cost to mine it/mint it. and compare that the market price. and see if there is a wide gap of speculation or if the market price is near value..
.. THEN if near value look if the project has any utility/features to sustain a prolonged life of the coin. and if so then you will know that its a good coin to buy into.

if the coin is speculating too high and its utility/features are not apparent. then dont invest.

lets use ethereum for example
if ethereum had all its utility it promotes to have.. then it would have its own market sentiment. its prices would not shadow bitcoins market swings in anyway. because an independent market with its own niche utility would have its own users with different mindsets and reason to be buying/selling.

however if (which ethereum does) shadow copy bitcoin market. then it show ethereums market is not powered by its own niche utility/community. but just being artificially held up speculatively by the bitcoin market arbitraging through ethereum. meaning that ethereum can crash back down to its new PoS(non PoW) value that is 99.5% less than its 2022 PoW value

I would rather invest more in bitcoin or Ethereum like you said instead of trying to look for what doesn't exist. Altcoins have not really given that expectation sort for over the last two halvings of bitcoin but bitcoin have proved a number of times to be reliable. Despite it drop in 2018 to $3,500, it came back stronger still having over 50% dominance in the market. Investing in bitcoin is more secured than trying to push all millions of coins into your wallet and they occupy space yet worthless.

None of this is needed, as long as you invest into things like bitcoin and ethereum they are all known and they are all vetted and you could just invest into those and you will be done. These type of "here is a way to lower the risk of investing into something super risky" methods are not helping, some people look for things they want to look for and still invest.

You can show someone the greatest coin ever, and if they do not want to invest they will find some small tiny reason not to invest, and you can show the worst possible token there is and if they want to invest they will ignore all the red flags. This is why it is quite important to know what you are going to do and how you could approach it at the same time.

I totally agree with you, Bitcoin is the origin, it is the source by which these developers have created other currencies with similar characteristics, but apparently with the intention of making improvements, and despite the fact that they have achieved this task, I  consider that they are still being tested, they were founded long after bitcoin, after discovering the potential of this popular asset, many took the initiative to see the flaws and based on that, create something much better, but despite the fact that They have managed to improve the defects of bitcoin in a certain way, they have not been able to overcome it, since the structure with which it was created is such that it continues to be chosen by many and this will continue to happen in the future as the adoption of this currency grow, its value and security will increase considerably.

Well, I wouldn't say that your point is incorrect because if I say that, I'll be wrong, however, I believe it is not as severe as you are describing it. Sure, altcoins are not as trusted as Bitcoin, most of them are not trusted at all, but there are some altcoins that can be used for investment purposes as they have been around for quite some time and they have been performing pretty well over the course, so maybe we can say that there are some exceptions.

After Bitcoin, Ethereum is the most trusted cryptocurrency and it has been going side by side with Bitcoin, never leaving position number 2, also, there are about 10 to 15 cryptocurrencies that are generally not bad, though you are right that we can't completely trust them as anything can happen.

Given the fact that, bitcoin has all this potentials you've listed down, I will stick with bitcoin , till I see another cryptocurrency that has bitcoin potentials.
A lot of coins over the years have been introduced to the market, with a lot of mouthwatering promises of its usability and potential to grow, but yet they don't last the test of time. However for me, once I've made up my mind to invest in a particular cryptocurrency,  then is a serious business, so i stick with what I can trust for the main time which is bitcoin.

There were a lot of crypto projects which were good and fulfilled all the criteria of being a good project but still, they ended up being scam projects, some of them got hacked (maybe by the team themselves or security loopholes) and others never performed as expected. Most of them do not follow the roadmap but they do gain a lot of hype because a lot is being promised when a project is launched but the project fails as most of these are made to gather funds and investments.

With that being the harsh reality, I think one should be very careful in investing in any altcoin for the long term and allocate only a small portion of their portion to it. The major portfolio should be in bitcoin and your focus should be in bitcoin and/or at most the large cap coins.

Honestly, this criteria has always been used and abused by most of the developers. When they're making a new project, what they always tell to their proposals is that it will solve scalable issues and problems. And on top of that, they're making it look like the old ones are outdated which somehow true for some but even with that, we can still see that they're on best shape and usable. That's why if we're looking at Bitcoin, many of those new projects have told that they're solving block issues that Bitcoin can't and at the same time, they keep on always throwing the same description like it's got an outdated blockchain/tech. But look where it is, still the top of them all.

For me I would just pick two factors, first whether the product actually solve a problem, if it does then the other factors like Community, User, Partnership, etch will follow, even if the Technology not too advanced, or even the developer is not some big names, but if they have working product and the product actually useful, its worth to watch. The second one is whether the Token of the project is essential, some project creating Crypto Token solely to raise some fund, then then after that the token has no use at all, then the company will eventually left the token buyers with nothing.

That's in theory and what you say is not wrong, but if you look at the reality all the criteria you mentioned are useless. For me in the crypto market, apart from bitcoin being a trustworthy project, we can trust the technology and the benefits it brings. The rest, don't believe anything they say, it's all just empty theory. Do you remember projects like EOS, NEM, LISK...do you still see what value it brings to us? If I'm not mistaken, they have claimed to bring us advanced technologies that are far superior to what bitcoin has. But what have they done so far? And other altcoins like Sol, Near or Avax...where are they in this bear season and what has their technology done for us? It's all just cliché and useless. When investing in altcoins, it all depends on our luck, don't believe what they say.

I'll give a rating from 0 to 5 (5 = most important) for each of the items you mention:

3/5. An interesting technology is mostly important for the launch phase, when it can help to create momentum. But most interesting tech developments can be used by other cryptocurrencies as well. However, I think this item is important for special-purpose blockchains, like privacy coins (Monero, Grin ...).

Small comment:
Probably because people don't know they're based on the PBFT model from 1999.

1/5. If the cryptocurrency is meant to work mainly as a token platform, at least it should provide the necessary features to enable "sound" tokenomics. But why should it not?

4/5. Agree mostly, but this is a quite trivial item.

5/5, at least if you mean the real-world adoption of applications. This is indeed crucial, and for example the factor separating BTC from LTC (because BTC is used/accepted in much more contexts) or ETH from chains like AVAX (because ETH continues to be the "main" token/NFT/DeFi platform). If instead you refer to "features" of the blockchain platform, then it overlaps with item 1.

4/5. What's important is that there are developers interested in maintaining and updating the coin.

3/5. Bitcoin benefitted for example when it was accepted by Wikipedia and Wikileaks. But the importance to have a long list of "partner" companies is rather limited. Quality beats quantity here.

3/5. First mover advantage and dominance can be important, as in the case of Bitcoin. But a good position at a specific time may not mean it's a good long-term investment. Take examples like NXT, Dash, or NEM. And not all cryptocurrencies see themselves as part of an "industry". Those that are part of an "industry" can barely be called cryptocurrencies

4/5. Of course community is important. But you're describing here more something like an army of shills.

Most of the items are clearly written from the point of view of a supporter of centralized cryptocurrencies. Apart from that I agree with most of them.

People often conflate investing in a token with investing in a project. They are two different things.

1. Is the token an essential component of the project? In other words, is the project viable with an existing token or without any token? For example, a taxi/ride-sharing app using a proprietary token has no real need for the token.

2. Is it possible to determine a value of the token based on its utility? For, example, the value of a governance token is tied directly to the value of being able to vote. How is that value determined? Also note that the value of a governance token is not necessarily related to the success of a project.

 1. Technology: Technology plays a crucial role in determining the advancement and superiority of a project. New blockchain projects or improvements to existing blockchain platforms are often considered potential opportunities. For example, Cardano (ADA) and Polkadot (DOT) have gained attention for their advanced blockchain technology. However, it is important to note that technology does not guarantee absolute success, and detailed research on the project's technology is crucial.

👉 2. Tokenomics: Tokenomics refers to the economic factors related to the project's cryptocurrency or token. Considering the total supply, token unlocking schedule, token utility, token allocation, and decentralization in token ownership are significant. A project with sound and attractive tokenomics can create stability and potential price appreciation for the cryptocurrency.

👉 3. Market capitalization: Market capitalization is an important factor in evaluating the size and value of a cryptocurrency. Coins with large market capitalization often have more reputation and higher liquidity but may have lower growth potential. Conversely, smaller market capitalization coins may have higher price appreciation opportunities but come with higher risks. Considering market capitalization helps assess whether a cryptocurrency is overvalued or undervalued.

👉 4. Utility and Application: Evaluating the utility of a cryptocurrency project is crucial. This includes considering the industry focus of the project and the target user base. If the project's utility is low, it may lose value due to a lack of user interest. Some practical applications of blockchain projects include decentralized finance solutions, NFTs, online gaming, and the metaverse.

👉 5. #DevelopmentTeam : The #DevelopmentTeam  plays a vital role in ensuring the success and growth of a project. This includes the experience, expertise, and vision of the team members. If a project has a reliable #DevelopmentTeam  with long-term commitment, it can increase the likelihood of success in the future.

👉 6. Collaboration and Partnerships: Collaborating with other companies, organizations, or projects can bring significant benefits to a cryptocurrency project. Collaboration can involve technology development, expanding the user network, or building new applications. Additionally, having reputable and positive interactions with partners can increase the project's chances of success and expand its reach.

👉 7. Industry Competition and Position: Evaluating a project's position within the industry can help assess its competitive ability and growth potential. Considering competitive rivals, differentiation, and competitive advantages of the project can provide crucial insights into its ability to penetrate the market and attract users.

👉 8. Socialization and User Community: A large, positive, and supportive community can drive the development and widespread acceptance of a cryptocurrency project. Socialization involves community participation, social media activities, events, and other interactive engagements. If a project has a strong and positive community, it can create momentum for the value appreciation of the cryptocurrency and enhance its development prospects.
 - I hope my post can help you make the right choice in the market

For more
https://www.researchgate.net/publication/328932235_Investing_With_Cryptocurrencies_-_Evaluating_the_Potential_of_Portfolio_Allocation_Strategies