Critical Analysis: Alt Coins
If you’re going to invest your money, first invest your time into learning about the coins on your own!
Unless you are an experienced day trader of cryptos, most likely your goal is to find altcoins that have lasting potential, there aren’t that many out there but by eliminating the bad apples early it will narrow your search.
What you’ll need is a critical mind armed with the right questions.
It can be difficult to find unbiased information about an alt coin. Most often when you google search it, you’re shown links to the official website. Which isn’t exactly designed to highlight it’s weak points. This is why it is so important when looking at these sites to have a keen sense of what they AREN'T telling you. They are the car salesmen. Yes they might actually have a great car for you that meets all of your needs, they also are there to sell you and unless you know what to look for, you could end up with a lemon.
The best way to find unbiased information on a coin is to look for recent publications concerning it. There are many crypto based news websites that you can look into, like these:
You should also look for reviews of the actual coin.
There are also people who seem to exist only to criticize alt coins.
At first glance, they may seem like Debbie Downers, but in reality they aren’t afraid to ask the tough questions, and if the coin can withstand the harshest critic, then that’s a good sign.
You should check out:
Listen to what they have to say.
If you don’t know which questions to ask, I found a great article that gives you some help and is the basis for this post:
It explains how to be critical of every aspect of an alt coin, from the technology and economics to the marketing and history.
Here are some things to look out for:
- What problem is the Cryptocurrency trying to solve ?
- Are there alternatives to address this problem that are more efficient?
- Is the Altcoin structured with central control or a decentralised governance?
And I think this last one is very important to consider:
- How much of the price of the cryptocurrency is based on the value being delivered today and how much is it based on future promises of development?
Marketing Strategy/Social Proof:
If you’re looking for an alt coin that has some longevity it’s wise to investigate it’s social circle. How big is the community? You can find out by checking how many followers the coin has on Twitter, and by paying a visit to it’s slack channel. Not only will you be able to see how active the community is, but you’ll also get a feel for the overall sentiment of the coin. The slack channel is also a great place for you to ask all of your hard hitting questions. Like how many times has the alt coin rebranded and why?
Development team and Technology:
- What is the new tech that the altcoin is developing? (if any)
- Can the solution be easily copied?
- What is unique about the team behind this altcoin?
- What are the weaknesses of the development team?
- Are the dev team accessible?
- Are their identities public?
Im sure you’ve heard the phrase pump and dump more than a few times by now.
These are essentially fueled by investors who spread FOMO to pump the price, that’s fear of missing out and then spread FUD to crash the price down, that’s fear, uncertainty and doubt. Many times it is the day traders who create these pump and dumps so they can skim profits.
But a real concern that will be more important in the future is when cryptocurrency ETFs are approved. This is cause for concern because ETFs will allow speculators to short a coin- or bet on it’s decrease of price- without actually having to hold that coin. This is called naked short selling.
When you want to look at the price analysis of a coin consider these things:
- Does the price pump and dump cycle make sense?
- Is it connected with actual events that add value to the currency?
- Is all the market rising or just the cryptocurrency in question?
- On what volume was the price increase or decrease done?
Economics of the coin:
- What is the inflation rate or deflation rate of the altcoin?
- Is the altcoin a PoS (Proof of Stake) or a PoW (Proof of Work)?
- If it is a PoS, what was the distribution model?
History of the coin:
Here is where you’ll find if the coin was designed to be just a scam, or if it was created with good intentions, yet implemented badly.
Analyzing the history of a coin is what will give you a better sense of the proof of progress the coin has made thus far and can also shows the direction the coin is heading in the future.
- Is the coin progressing towards its goal?
- Was the coin insta-mined or pre-mined?
- Was that money put to good use?
- Did the creators announce the exact launch time and date of the coin?
- Who are the most influential critics and what have they commented on the altcoin in the past?
- How has the altcoin changed over time?
Now that you know what to be critical of, I encourage you to go out and conduct your own research, join the slack channels and start a conversation with the developers. Read up on any articles concerning the coin and see how it’s progressed, how or if it has made progress, and see what the other critics have to say about it.