In 2020, the cryptocurrency #market saw a new wave of ICOs, powered by the excitement around decentralized finance (DeFi). Many related coins went up by hundreds of percent immediately after the initial sale, such as Polkastarter. But there are other examples when the price of assets fell many times, sometimes tens of times, after the token #sale .
In order to make money investing in new tokens or at least not to lose money on it, it is important to choose promising #projects correctly. Famous representatives of the cryptoindustry told us how to do it and what to pay attention to.
Development team 💡They must have knowledge, experience and understanding of the market, this is an important criterion, warns Sergey Troshin, head of the data center Six Nines. As an example, he cited the project of Pavel Durov, whose team was largely the key to the success of TON and helped to attract investment. Although the project was closed due to the ban issued by the U.S. court.
White Paper💡 Troshin advises to study White Paper when choosing projects. A promising startup must have a detailed documentation. It should clearly describe the task that the developers are solving, and cannot, for example, consist of only two pages: it is a longer document.
It is important to study the background of the project team and who is behind it 💡This advice from EXMO Exchange Development Director Maria Stankevich. She also named a few other important parameters.
🎯Determine how interesting and promising the idea is.
🎯Check the MVP - a minimum working prototype.
🎯Check the execution of the roadmap. It is important to understand how the project is progressing, whether deadlines and deadlines are being met.
🎯Get to know the project's community. Examine the general information field around the startup and see how threads are maintained in the specialized forums.
🎯Determine the market value of the project. That is, understand whether the market really needs it and whether it will be useful.
Segmentation and uniqueness
Evaluate the market segment to which the project belongs. This was the recommendation made by Viktor Pershikov, lead analyst at 8848 Invest. He said that projects relating to fintech, logistics and cloud solutions are in demand at the start. This is evidenced by the direction of the flow of venture investments in 2020.
"In the fintech sector, companies providing debit cryptocurrencies, custodial services, online wallets, and decentralized #exchange (DeFi) are worth paying attention to," Pershikov believes.
According to him, it is necessary to invest in projects from sectors that are in demand among venture capital and institutional investors. This is the foundation for medium-term growth in the price of tokens, not just a local spike after listing on exchanges.
The uniqueness of the project and its viability. These parameters of a successful project were named by private trader Alexander Boyarintsev. Among these parameters he also considered the liquidity of the tokens. In terms of trading volume, a promising coin should be close to cryptocurrencies included in the top 50 by capitalization.
Boyarintsev advised to buy tokens before they are added to trading floors, before the price rises. After listing, it is difficult to make money investing in new coins, the trader stressed.
Stankiewicz has a different point of view. Of course, you can buy new tokens cheaper before listing on exchanges. But it's better to wait for the project to appear on trustworthy trading floors. Before adding assets, they conduct a thorough analysis, assess possible risks, and study the startup's activities and financial situation.
"There are certainly advantages to buying a coin at an early stage - first of all, the low cost. But we recommend waiting for a listing on medium and large exchanges, as such exchanges usually have a rather complicated due dilligence process," Stankevich explained.
Troshin took an intermediate position. He believes that if a trader is lucky enough to find a project with great prospects, but the goal is speculative, it is better to buy tokens at the ICO phase. If we are talking about long-term investments, it will be more effective to wait for the launch of the project first, and then buy coins after their value decreases.
In mid-September, Qiao Wang, a former product manager at analyst firm Messari, called DeFi tokens "the investment opportunity of the decade. He believes that not taking this chance is like not buying bitcoin in 2013 or Ethereum in 2015, even though there is a lot of "junk" in this industry.
👉🏻That's why it's crucial to choose projects that develop a real product and have a fundamental basis for growth.👈🏻