Value Investing In Cryptocurrencies
An important step for any serious crypto trader or asset investor is to understand the importance of research. The maxim of Do Your Own Research or DYOR is a golden rule. But just how do you do your own research? Is it a technical analysis or a fundamental one?
A good trader will learn valuable lessons from each, and also be able to profit from each. Depth of insight both technical and fundamental analysis is beyond the scope of this article - however today we will focus on a fundamentally inclined analysis for finding undervalued assets to hold long term. These are the kind that I slowly accumulate at attractively low entry points, if my analysis is correct, will reap the most gain. This can be anything from 10x to 100x of my entry.
Value Investing is when an investing in an asset that is underpriced at the time of investing. The value should to some degree come from an informed fundamental analysis. The idea is nothing new and has been talked, taught and used by many over the past century. Benjamin Graham is often regarded as the "father of value investing". The investor, economist and professor of Columbia Business School wrote the 1949 book The Intelligent Investor. Warren Buffett is a follower of Graham's and it is no secret that the billionaire investor is a strong proponent of Value Investing. The book is a lengthy must read for any serious investor, regardless of asset class. A key takeaway to buy when assets are so discounted in terms of intrinsic value that you can hold them and profit at any premium or hike in value. Buying the dip partly in the same mindset.
To begin with it is important to understand the asset you are researching and the nature of it. By this, I mean the function and layer of it. If we look at bitcoin for example, many will point out that it is a currency and settlement blockchain. Ethereum on the other hand goes deeper, the first layer of the asset is settlement and as a second deeper layer it is able to be used to execute smart contracts. In summary of layers - we should be able to identify the layers (if any). Recently protocol type assets are those that are more layers or can be more layered. Of course Ethereum will be a popular example, but less developed ones coming to market are Lisk or Ark. Decentralised applications or dApps will be build on top of these.
By now you have probably already guessed that the protocol can have a massive growth in value as application are built on top of it - provided that there is use and adoption. For Ethereum at the moment of writing, it is the ICO adoption that pushed it all the way from around $10 up to $400 in the first half of 2017. Our goal in this post is to find other assets that have this type of growth possibility.
The factors to consider can easily be remembered by the initials MIGC
Factors Of Cryptoassets For Value Investing:
Market
What problem will it solve (if successful)? What is the use of [asset]?
Implementation
Is the goal achievable? Or if the product is already working - how well does it do what it sets out to do?
For example if a protocol promised teleportation - while this might be achievable in the distant future - it is a general understanding that this is far from achievable with the tools and technology of today. You want an asset that can ideally be implemented now, or in the near future.
Growth and Scale
Can the asset or currency grow in use and scale?
Competition
Which other projects are offering similar promises and how close are they to reaching them? An example of this is ETH and ETC. While both can in theory compete with each other due to their similar characteristics post fork, one of the two assets is so far ahead in Market, Implementation, and Scale. However, this does not rule out Ethereum Classic as a bad investment. In fact, ETC might very well be a better investment for a late comer given the fact that ETC developers can see problems ETH faces [in terms of scale, hackability for example] and address them before they even surface in the ETC environment.
Stay posted for examples of my own for you to get the grasp of how I locate undervalued coins.
Stay safe and stay in profits.
-Tyler Crypto
Tipjars
Bitcoin: 1Btt9fJsSw1Hj5NeKy8DmyU4C3hxvFLcZV
Litecoin: LPh4MayLMDqYAVSumnoSMyRhVS1EmvEVaS
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Lisk is a interesting project due to the fact that there are 1000s of JavaScript devs. Once they get their platform ready it could be fun even I just hold a few lisk myself. Ark that is similar to lisk but different in their approach could be the Swiss Army knife of block chain. I have bought ark every other day with my sbd earnings for a month now.
Although I am much more heavy in $LSK I did pickup some $ARK this month as well. You've definitely locked in a guy buy-zone this month!
Let's hope so. I even hope bitcoins trouble continue so I can get a better exposure to the more interesting cryptos.