Each growth cycle of the cryptocurrency market brings surges of many new altcoins, promising to change the decentralized finance industry and expand blockchain applications. However, as excitement subsides, many altcoins 'fall off' and lose value. Names that were once frequently mentioned, such as RACA, LUNA, GMT, caused a sensation but were quickly forgotten. Looking back, it can be seen that many altcoins often fail to recover after the hype and fall into some typical risk groups.
Three groups of altcoins to be cautious of:
1. Outdated technology: The cryptocurrency market continuously evolves with new breakthroughs in security, scalability, and interoperability. Projects that cannot update their technology will quickly become obsolete and lose competitiveness, causing their value to gradually decline.
2. Short-term trend tokens: Some altcoins surge due to temporary trends, such as Play-to-Earn (P2E) or Walk-to-Earn (W2E). As interest wanes, these tokens quickly lose value due to a lack of real demand from users or a sustainable application platform.
3. Artificially inflated tokens: Some projects create an illusion of demand by manipulating supply and demand, combined with strong marketing campaigns. Initially, they may attract investors, but when there is a lack of real demand from the market, these tokens can easily lose value.
How to protect your portfolio?
To manage risks, investors should:
• Do your own research (DYOR): Do not rely solely on market excitement; analyze the technology, team, and development roadmap of the project.
• Prioritize continuously innovating projects: Projects that continuously improve technology and practical applications will have greater potential for sustainable growth.
• Community assessment and applicability: Projects with strong communities and clear use cases tend to have a higher chance of survival, even during market correction phases.
The cryptocurrency market is both an opportunity and a significant risk. Identifying warning signs can help investors avoid altcoins lacking long-term potential, focusing instead on sustainable investments with real value.
