This post is very near and dear to me. It took a lot of time and effort to conduct the research and compile this outline. My research has come from a wide variety of sources of prolific individuals within the regular financial markets and crypto space.
Many in the financial sector are not willing to share their secrets. I feel that knowledge is power! The more people I can empower with the tools to succeed, the more successful we can all become.
Well here goes nothing, I hope you like it!
Nick’s Crypto Investment Analysis
1.) Basics of the Coin Itself
- How long has the coin been around? Bitcoin has been in circulation for 8 years, versus EOS who is still in their ICO stage having been in circulation for a few weeks.
- How many coins are in circulation vs total market cap? Many of these stats can be found on coinmarketcap.com. This is how each single coin in priced (Market cap/# of coins in circulation) = single coin price
- What is the inflation rate, if any? (Very important to determine long term valuation. Steem's current inflation rate as of December 6th, 2016 is 9.5% yearly, with a reduction by 0.5% per year).
- What is the volume of the coin being traded? (24hour, 1 week average, important to think about in terms of "liquidity" or being able to buy and sell when the time is right).
- Coins recent activity of the past day/week/month/year? (Chart analysis)
-These basics are what I use to determine if a coin is worth doing further research on. If a coin does not meet what I deem to be worth my time, I will invest no further research into it until proven otherwise.
2.) Community Behind the Coin
- How many transactions are taking place per day? This is important to determine use cases for the coin.
- What is their Alexa rankings? This helps to evaluate the amount of web traffic that the coin is receiving. Today Steemit.com ranks 4,287th in the global rankings and 1,267 in US rankings for most visited website.
- Are there social media pages for the coin? Reddit is an incubator for excellent community info and growth stats. Twitter, Slack channel, Facebook and Instagram are also good sources. These sites give you an idea of the community in terms of numbers who are speaking about it, but more importantly the quality of the users. If you can not find any hard data, or it seems like a bunch of yokels talking about nothing analytical, it may be a bad sign. You must constantly analyse everything you take in, where it came from, who said it, who they are, why might they have said it. Authors personnel interests matter!
- Number and function of active nodes? Look up mining statistics, Ethereum is a great example, are they going up or down and how does this relate to how the network will operate.
- Community behind the currency is one of my biggest driving factors! That is what drew me to invest a large portion of my crypto portfolio in Steem. I believe in this community and what we are building here!
3.) Technology & Direction of the Coin
- Is this a unique idea or are they building upon something already established with a new twist? When Ethereum came out, it was the first protocol system (that I knew of) of its kind. Or Litecoin that is a branch of Bitcoin, but with faster transaction times. This helps you to evaluate if the technology is proven or if we are in uncharted waters. Uncharted waters are common place here in the crypto space!
- What is the possible market cap? Bitcoin for example has the goal to replace fiat (any government owned currency), so its market cap could essentially be all money. Where as a company like Factom is looking to act as a database to secure information of contracts, deeds and other critical pieces of data and would only have a total market cap of all the companies that currently hold and store data in a secure way.
- Are the current transactions use cases or speculative investments? Steemit is an excellent example of use cases of Steem as you can currently transact and use Steem for one of its intended purposes, where EOS investments are purely speculative as the network is not running at this point in time.
- What is the direction the company is heading in? Do they desire to take over the world, or are they trying to take over a niche market?
- Is the coin scalable? As many know, Bitcoin is having scaling issues as transactions can often take 30 minutes. You want to ask yourself if the company is trying to grow to it potential market cap, can its network actually handle to amount of users or use cases this will require. This is an important piece to think about for long term investment.
4.) Development Team Behind the Coin
- Who is leading the development team and what is their history? Basic attention token has Brendan Eich leading its team. Brendan was the creator of JavaScript and co-founded Firefox. While, Ethereum has a skinny nerd from Russia, who wrote articles for a bitcoin magazine before designing the cryptocurrency with an evaluation today around 20+ billion dollars. This is not an end all be all, but can rally help you to determine its likely hood of success for long term investing.
- Is the leader likeable? Vitalik Buterin of Ethereum may seem nerdy on the outside, but he is exactly what people would expect someone to look and act like who has developed this type of technology. Would you feel the same way if someone like Cristiano Ronaldo created it. You might feel a bit like you were getting scammed, no? Many people buy the brand, they buy the face of the company without knowing all the details, so this must be a factor in your judgement as you want to be where the masses will go before the masses get there.
- Who is a part of the development team? What work have they done? Do they have a history of past failures or successes. Again this is not an end all be all, but can help to give you an idea of who is behind the coin. When time gets rough, of are going great, they are the ones who will help your investment fly or sink it into the ground.
- How has the team responded to problems that have come about? Issues are guaranteed to arise and the teams ability to deal with them quickly and efficiently are key. Also you must look at if they dealt with these issues publicly. Poloniex is not a currency, but when they were hold many of Steemit's users SBD's on their site, there was little communication with the users as to what the problem was or when it may be fixed. When a company publicly announces their problems and how and when they are fixing them it is much more reassuring to the users. Customer Service is Important!
Not one single piece can give you an exact idea of weather or not you should invest in the coin, but with in depth research you will be able to find the answers to these questions and better evaluate your investment.
I have always stuck with the motto of, "Never Invest in What You Don't Understand." This is difficult in the short run, but will pay dividends in the long run as knowledge is power.
-I am looking to publish reports using this format on some of the coins that I have done the research on. I wanted to see if you all enjoyed this format and would like to see some reports of currencies done in this format. Please comment below with anything you liked or would have added to the report and why?
Look for my reports in the future.
Thank you all so very much for the support that you have shown me over the last few months!
Keep pushing yourself and great things will happen,
Nick
-Disclaimer- All the information on this blog is my personnel opinion and should not be considered professional financial investment advice. All information on this blog is for informational purposes only.