How To Find Crypto Gems
There are many YouTubers and crypto gurus on the internet extolling their favourite tokens, but how do we know if these tokens are worth buying or are they just being shilled?
Here we have put together some pointers to help you filter out the gems from the average and scam tokens.
DYOR – Do your own research
Our first step is to search for the token on CoinGecko.com or CoinMarketCap.com.
From here we can find the company website and the white paper.
The white paper gives a summary of the project and explains concisely solutions to existing problems.
From the website, we can determine if the project is finished and if it already has customers. Obviously, the risk will be higher for unfinished projects with no current customers, so bear this in mind.
Take a good look at the white paper and ask yourself if it has been quickly put together in a few days, or is it a detailed piece of work requiring an educated project management team?
Look at the team behind the project.
If the team is not listed on the website, go to Linked-In and search for the project. Look at the management team. Have they worked at well-known companies? If so, how long?
Do they have a good educational background in the area of their vocation?
Does the project have good backing from established investors?
Go to Github – is the project listed? Is it open source? If not, that’s a warning sign.
How many people are following the project on Github? – Look at the number of stars and forks.
When was the code last updated? If not recently, it could be an alarm bell.
Have files been updated etc with value code? Who updated the files – marketers or coders.
How is the community – look at Twitter – how many followers?
Look at Facebook – how many followers.
Is the market liquid?
Liquidity is important in trading because it helps to keep the asset price stable. We don’t want to invest in a project with an unstable price.
To find the liquidity of a project, take the daily trading volume and divide it by the market cap.
Tokens with a volume/market cap ratio of less than 10% means the token is not very liquid and is probably not a good idea to invest in. A good ratio is between 10% and 50%
Examples of liquidity based on prices:
Theta Market Cap = $626,605,451
Trading Volume = $20,203,934
Volume/Market Cap 0.0322 – in this case the liquidity is less than 10%
Chainlink Market Cap = $5,096,209,048
Trading Volume = $980,121,958
Volume/Market Cap = 0.1989 – in this case the liquidity is greater than 10% ie 0.1 = 10%
For those of us who are pushed for time to do research, there is a useful website called TokenMetrics, which uses artificial intelligence to predict future cryptocurrency price moves.
The website is the creation of Ian Balina, who is well-known in the crypto space for his expertise in finding value investments.
The website is not free, but comes with a money back guarantee if you are not completely satisfied with the performance.
You can watch a promotional video here