Investing in cryptocurrencies has always been a daunting hurdle for mass users due to its additional wild volatility and unpredictable price swings. However, it also opens the door for lucrative quick gains and lifetime opportunities. Though the crypto market operates fully within data and not on speculations, investing in newly launched cryptocurrencies has always been a nerve-wracking headache for everyone.
The lack of data metrics and FOMO sometimes bewilders even stalwarts. New projects make boasted promises, and the community often builds a cult-like following around it, leading people to make biased decisions. There's always potential for substantial rewards, but it also comes pre-bundled with risks.
TL; DR
Newly launched cryptocurrencies enter the market after their Token Generation Event (TGE) and often carry high volatility and risks like liquidity issues, scams, and regulatory uncertainty.
Potential risks include low liquidity, market hype, lack of track record, and technological vulnerabilities.
Benefits include growth potential, low price entry, and diversification, with opportunities like airdrops or staking bonuses.
To manage risk, conduct thorough research on fundamentals, team, tokenomics, and community, check audits, monitor vesting schedules, and start with small investments, scaling gradually.
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What Are Newly Launched Cryptocurrencies?
There’s a subtle difference between newly listed and newly launched cryptocurrencies. We are talking about the latter, where the first one may indicate a potential debut in specific exchange, but we are focusing on projects launching their coins after the Token Generation Event (TGE).
To put it simply, newly launched cryptocurrencies are coins that have just officially entered the market after the TGE. These projects may offer groundbreaking use cases, unique technologies, or improvements over existing cryptocurrencies, but they are generally more volatile and carry inherent risks due to limited market adoption, liquidity, and historical data.
Risks of Investing Newly Launched Crypto
Newly launched cryptocurrencies often come with potential risks, while established players tend to have stable holders and a trusted community. Newly launched cryptocurrencies are frequently tested by various risks.
🔸Liquidity Issues: Newly launched coins often struggle with low liquidity, as highlighted by Cointelegraph. This lack of liquidity means there may not be enough buyers or sellers, leading to significant price slippage when trading. This makes it harder for investors to exit their positions, especially when the market is bearish.
🔸Scams and Rug Pulls: The unregulated nature of the crypto market makes it a breeding ground for scams. Chainalysis reports that fraudsters commonly launch projects, generate hype, and then disappear with investor funds once a significant capital pool is raised, leaving investors with worthless tokens.
🔸Market Hype and FOMO: Fear of missing out (FOMO) plays a huge role in newly launched cryptocurrencies. Many projects leverage this sentiment to create a buying frenzy. However, as Messari points out, these speculative bubbles often burst, leaving investors holding devalued assets when the hype fades.
🔸Volatility: According to Binance Research, newly launched cryptocurrencies are extremely volatile due to their short market history and heavy reliance on speculation rather than fundamentals. Price swings can be severe, leading to sharp gains that may evaporate just as quickly.
🔸Lack of Track Record: New cryptocurrencies generally lack a proven history, making it difficult to assess their potential for long-term success. A large number of these projects fail to meet their promises, leading to a high failure rate within a short time.
🔸Regulatory Uncertainty: Since many new tokens operate in a largely unregulated environment, there’s often uncertainty regarding their legal standing. This uncertainty can lead to sudden changes in the regulatory landscape that can affect token value or lead to delisting.
🔸Technology Risks: Early-stage projects may face technological challenges or security vulnerabilities that haven’t been tested extensively. Bugs, hacks, or exploits can lead to significant losses for investors if the project is compromised.
Benefits Of Newly Launched Cryptocurrencies
Not everything is about hurdles and potholes. Newly launched cryptocurrencies represent new hope. Many newly launched technologies replace legacy systems and their coins. Fresh communities strive to build a brand. Ethereum, for example, was launched to overcome the restrictions and slow nature of the legacy Bitcoin chain.
Many newly launched cryptocurrencies have outperformed the entire market through their narrative, new technology, and, most importantly, their use cases. New Crypto List
Narrative: New cryptos often bring exciting technologies, like DeFi, NFTs, or improved blockchain systems. If these innovations succeed, early investors can benefit from the growth. We saw this with Artificial Intelligence rallies.
Airdrops: Many new cryptocurrency projects offer exclusive rewards such as staking bonuses, airdrops, or yield farming to attract early adopters, adding more value to your investment. Many Projects Do Stakedrop Recently SEI did Airdrop For their Early Stakers.
Growth Potential: Early-stage cryptocurrencies have the chance to skyrocket if they gain popularity. Getting in early could lead to significant profits as the price rises.
Low Price Entry: Newly launched cryptocurrencies usually have lower prices than big players like Bitcoin or Ethereum, meaning you can buy more tokens for less money.
Diversification: Investing in new cryptocurrencies helps diversify your portfolio, spreading the risk across different projects and technologies.
How To Exclude Risk
It's almost impossible to exclude all risk factors while investing in newer coins, but we can avoid some mistakes and take some data-driven actions to manage the risk. Here are some actions you might consider to mitigate risks while investing in newly launched cryptocurrencies.
🔹 Research the Project's Fundamentals : The project's fundamentals are one of the most important measures to understand the real potential of a project. Fundamental analysis is an underrated area. Focus on what problem the project is solving and identify the most important factors driving demand for its token. Understanding the use case, partnerships, and technological innovation will give deeper insights into the project's viability.
🔹 Analyze the Team and Developers: When investing in newly launched cryptocurrencies, checking the team and developers behind the project is crucial. Look into the team's background and verify their credentials through platforms like LinkedIn. A well-experienced and reputable team often increases the chances of project success. Developers with strong track records in blockchain development or relevant industries should be prioritized.
🔹 Review the Tokenomics: Tokenomics is the most underrated yet one of the most important factors in any cryptocurrency. Good tokenomics should strike a balance between team allocations, contributor incentives, investor holdings, and community-driven rewards. Consider the total supply, token distribution, and potential for inflation. A fair and transparent token allocation can prevent centralization and manipulation.
🔹 Evaluate Community Engagement and Transparency: When investing in a new project, it's essential to check the community and their level of engagement. A highly active community is crucial for a project's long-term brand building and adoption. Review the project’s social media presence, engagement rates (not just follower numbers), and how transparent the team is in communicating updates and addressing concerns. Strong, genuine community support is a key indicator of sustainability.
🔹 Check for Audits and Security Measures: This area may seem technical, but it’s not something you need to manually check yourself. Several third-party companies perform audits and security checks for cryptocurrency projects. Review the audit reports from trusted firms and ensure the project has certifications or endorsements regarding its security protocols. Avoid projects with weak or missing audits, as security vulnerabilities can lead to exploitation and losses.
🔹 Assess Market Liquidity and Trading Volume: Market liquidity is a critical factor when investing in newly launched coins. Low liquidity can make it difficult to enter or exit a position without drastically affecting the price. Check the trading volume across various exchanges. A good liquidity pool ensures smoother trades and protects against extreme price volatility. Projects with poor liquidity can be highly risky.
🔹 Monitor the Vesting Schedule and Circulating Supply: One of the most important factors affecting any coin's price is its supply. If a coin’s circulating supply is low at the start, it can face price dumps later due to unlocking schedules and vested token releases. Monitor the vesting schedules to understand when large quantities of tokens will be unlocked and how that might impact the market. Sharp increases in supply can lead to price crashes if not properly managed.
🔹 Start Small and Scale Gradually: When investing in a relatively new token, take a cautious approach because numerous hurdles can turn your investment into losses. Avoid going all in at once. Allocate a specific portion of your portfolio to new projects and increase your exposure gradually as you gain more confidence in the project. Diversifying between several promising new projects can also help dimmish the risk.
🎟️ Some Goodreads
▶️ Data Credit
> Binance Research
> Cointelegraph
> Messari
> Investopedia