Intro

This is my first article, I’m not a native speaker, so please be patient about typos and language issues. Here’s why you should read on: I’m a technologist with a business and tech background with fintech startup experience in a COO role. This should give me a quite interesting view on the crypto market.

The Altcoin Boom

Alternative coins did face a huge boom in Q4/17 and even after the well expected setback Jan. 18 most of them are still up by factors over just a few months. Many people started new coins, and even more did put money in. Arguments I heard reached from “i like the idea” to “it’s just 30 cents it can easy quadruple” and “ crypto will rule the world, we don’t need banks anymore”.
If you are one of them, I want you to ask yourself just this simple question:
Are you an investor or is it speculation?
Just to clarify, I don’t think there’s anything bad about speculation, and both a investor and a speculator are in to gain money.
But in Cryptos, there’s a downside. Speculation causes volatility, and volatility harms the usefulness of coins in terms of wealth storage and payment. Just imagine you sell a product and the coins you receive change their value within minutes, but you have to pay your suppliers. Also, there’s a lot of buzz in coins about the technology, the usability and the development of long term state independent currencies which seems to be a higher goal, something worth achieving. The harder it is when you figure out, that most of the “Hodl” guys are actually in just for the quick and easy money, for the effortless gain of fortunes.

Recipe for desaster?

This gold rush mood leads to a very dangerous situation, with a lot of guys holding stakes of a technology they neither understand nor where the value is stemming from. Many of the tech applications for the blockchain are not necessarily linked to the value of the specific coins or tokens, they are used as finance instruments.
As we know, this is a recipe for crisis, when people don’t know where risk is allocated and what they actually invested.

A Coin is a Fintech Startup

While for me it’s still a fun fact cryptos are measured in FIAT, we do see valuations in the range of top tier tech unicorns. Companies with several thousands employees and profitable worldwide business operations.
Chances are high there will be major setbacks, and for me it is legit to compare it to startups (the reason: They are fintech startups, teams developing and marketing a technology): 7 out of 10 fail. So during setbacks a selection process will start,
coins will die, teams will quit their projects, and people will lose money, as it is with startups.
Which brings me back to the start - in which altcoins are you invested and did you do your job as an investor or are you speculating?
It should be treated the same way as a venture capitalist invests in a startup - because it’s somewhat similar. In short, It’s a small team starting a new tech venture. And this means do you have to do a due diligence like any angle or VC would do.

Checklist

Here’s a raw checklist (PTTER) to cover some major points, I use it myself to understand coins and projects.

• Purpose \ Market
  Do you understand what this coin should do and how it should be used?
  Is there a market so this could be used in a large scale?

• Team
  Do you know the team, does the team has a track record, do they have different roles and enough coding capacity to develop a blockchain for the purpose they say?
  Do they have a relationship to that purpose, e.g. Kodak building a crypto for photographers?
  Do they get along personally and do they seem trustworthy/ legit?

• Technology
  Did you read and understand the whitepaper?
  Is what’s already existent safe, e.g. a secure wallet, and is it programmed bug free?
  Is the technology a step forward, does it make sense tech wise?
  Has there been any pre-mining or other shady behavior?

• Environment
  Is there already an environment for this coin?
  Are there wallets?
  Do they have nodes or potential partners?
  Is it tradeable at exchanges?

• Risk
  What are the major risks and challenges for this?

If you can answer most of theses questions, you did your job well.
In case you don’t, I’m sorry to tell you that your investment is just a gamble. So do your homework for your next bet. You don’t have to use my checklist, but at least you need some process of due diligence.

Feel free to add your thoughts, improve this checklist and let me know your criteria to invest in an (alt) coin!