What are the risks of buying altcoins? How to filter out quality altcoins?
1. Low survival rate
The altcoin market carries high risks. About 90% of altcoins disappear each year, with trading volumes approaching zero, meaning most altcoins cannot exist in the long term.
2. Manipulation risks
Additionally, some altcoin communities have groups that drive prices, inflating them rapidly through hype and promotion. However, this manipulation risk may ultimately turn some investors into 'bag holders'.
3. Lack of technological innovation poses challenges to industry development
Although altcoins have brought a significant influx of capital, they generally lack technological innovation. This phenomenon of lacking technology-driven development may impact the innovative advancement of the crypto industry in the long run.
How to filter out quality altcoins?
Choose coins that have been online for more than six months: Such coins have usually undergone initial market testing and are more likely to attract attention and capital inflow.
Avoid new coins where VC chips are more than five times the retail investors' price: Before buying, carefully examine its fully diluted valuation (FDV), compare it with the previous round of private placements and current prices, as well as the valuations of other Layer 2 projects.
Look for coins with obvious bottom signals: This indicates that they may have already hit the bottom and are starting to attract more buying interest.
Observe gradually increasing trading volume: This may signal that institutional investors are beginning to build positions.
Choose coins with revenue: Whether it's protocol revenue or service income, projects that can sustain their teams through their cash flow do not need to frequently cash out. If the revenue can also be linked to the coin price, such as through buybacks or dividends, that would be even better.