As an avid user of Reddit within the last two months focusing on altcoins (I have invested a quite a bit). One trend seems to stand out among redditors. They usually ask the question “What makes this coin/token stand out?”.
I understand that many would rather avoid reading the white paper and follow the hype but that is a dangerous road to trod. Personally, after having “hits” with several coins in my portfolio that have grown between 5x and 25x over the last couple of months. I can only say I am grateful. With that said, I am not here to praise what I have done but rather share the first basic formula I use in choosing altcoins/tokens to invest in.
I use the three (3) basic states of matter we all learned about during elementary school to categorize white papers: Solid, Liquid and Gas(Air more loosely).
The Solids — Rate of failure: 50%
These are companies that were already operational but are finding/have found a way to integrate blockchain technology within their core operations. Their existence was not solely dependent on the cryptocurrency world but they’ve found away to benefit from it. These whitepapers are usually financially and operationally sound if nothing else since in most cases they already have P/L statements and a reliable organizational structure. E.g. Binance (ranked #25 on CMC), Civic (Ranked #104) and RentBerry (which is close to wrapping up its token sale).
The Liquids — Rate of failure: 55%
These aren’t companies but projects that may become companies. They usually appear in the form of coins and their white papers are primarily technical more than anything else. Liquid in terms of states of matter is touted as having the ability to take “shape”. Translating that into white paper means these projects are also trying to shape the future with the current tech they are working on. Lisk (Ranked #20), Ark (Ranked #46) and Neblio (Ranked #82) all come to mind.
The Gases (Air) — Rate of failure: 90%
These are perhaps the easiest to define. No Tech, No real company; just a white paper and team sometimes ranging from a dozen to over a score of individuals. They generally appear in the form of a token. You will often find yourself asking the questions: “why?” and “how?”. This is not to say they won’t deliver but they have nothing yet and it’s important to be cautious when investing in them. While I gave examples for the previous two (2) states. I rather not do so with this one as it is not my intention to harm anyone’s reputation. However, this should be pretty easy to find out just by visiting the website (if there is one). The white paper is just a bonus.
The above isn’t the only vital piece of information that determine how good an investment might be but it’s a good base for getting your feet grounded.
I reject the idea that 90% of the cryptocurrency projects will fail or that we are in a bubble. I believe that closer to 50% will fail and that the current market cap of $600+ billion can’t be considered a bubble when Facebook (one fortune 500 company) is rivaling that value. If we were speaking of $6 trillion dollars then it would be a different story. Let’s save the bubble talk until it approaches a multi-trillion dollar market cap.