Some friends in the community asked me how to screen altcoins. Today I will share my screening criteria.
Before you decide to invest in an altcoin, check to see if it meets the following criteria:
1. Try to avoid participating in projects developed by Chinese people
This is not a prejudice against Chinese people, but because the community influence and solidarity of Chinese projects are relatively low.
Foreign projects are usually able to quickly build communities and attract funds, while Chinese projects, due to lack of continued support, are prone to return to zero after the first wave of increases.
However, this situation is improving, especially after some projects were listed on Binance, community building has been strengthened.
2. Choose projects with actual business and avoid air coins
If a project needs to be mysterious to attract attention, it may not be solid enough.
For example, some projects claim to cooperate with large platforms and will be listed on Binance soon, etc. This shows that such projects have no substantial content and are likely to be launched online and then run away.
The market is now very disgusted with air coins that only tell stories.
If you want to invest in Layer2 or a public chain, first check whether anyone has been active on it in the past six months.
If it is a DeFi project, see if its business and revenue are growing.
3. Choose a project with income
Whether it is agreement income or service income, projects that can support the team with their own cash flow do not need to cash out frequently.
It would be even better if the income could be linked to the price of the currency, such as through buybacks or dividends.
For example, projects such as AAVE, Uniswap, etc.
4. Be cautious about new projects that suddenly surge
When a small project suddenly explodes in popularity, it’s usually because a famous person mentioned it.
In this case, the first people in are likely to be robots or very sharp traders.
If you follow up from behind, you will most likely just be providing them with exit liquidity.
On the contrary, projects that grow slowly usually have better community support.
5. When the market is good, you should ambush more; when the market is bad, you should stick together more.
When the market is good, information spreads quickly and projects tend to skyrocket.
At this time, you can ambush more potential projects and wait for opportunities.
When the market is bad, it may be more effective to participate in popular projects in a group.
For example, if a celebrity frequently mentions a certain topic, you can ambush related projects in advance and wait for the market to react.
However, this type of project is only suitable for small-position participation, quick entry and exit, and stop when you see good results.
6. Avoid new coin VC chips that are more than 5 times more expensive than retail investors
At least wait until the price drops before considering it. Especially in this round of VC coins, many people just want to get their money back.
So before buying, take a close look at its fully diluted valuation (FDV).
First, see how much more expensive its current price is than the previous private placement, and then compare it with other Layer 2 valuations.
Then compare it with the ceiling valuation of this track in the previous round to see how much potential profit there is.
Listen less to other people’s calls for buying, use its products more before buying, look at the number of users and actual business, and pay more attention to the fully diluted valuation (FDV) and the valuation of the previous cycle.
This way you can judge more rationally whether the price is reasonable, instead of just thinking that the price has bottomed out just because it has dropped by 80%.
Only buy things that you understand and believe in, and you will be able to outperform at least 90% of people.
Please note that the above are just some personal experience sharing and do not constitute any investment advice.
This screening criteria is not static and will be continuously updated as we understand the industry.
