Cryptocurrency is a very promising investment, especially in tumultuous times. However where there is big money, bad actors and crime are sure to follow. It's critically important to do your research and know who you're investing in.
Read the full story below.
How much of the supply has been released and how much has yet to be released?
There is nothing worse than seeing your hard earned money lose value because of excessive incoming supply. On the flip side, there may also be nothing worse than one person controlling the entire supply of currency, leaving everyone else scraps to fight over. Ideally you want to invest in an established currency that releases a reasonable amount of new supply each year.
Market Cap vs Rest of Industry
If you are going to invest in an industry with nearly 1000 active competitors, you want to make sure you're investing in a currency that has room to grow, not one whose price is already bloated. If you invest in an over valued currency, whose greatest asset is speculation and hype, don't be surprised if you end up kissing your hard earned money goodbye. It's also important that the investment has a reasonable amount of liquidity, should you need to sell in an emergency.
Was there a premine and what was it used for?
A premine occurs when the development team mined their own currency prior to public launch. If the developers premined their own currency, it's in your best interest to know what they put the money towards prior to investing in them. Acceptable uses for a premine include public giveaways, staff salary, currency development, or other initiatives that benefit stakeholders. Not so acceptable uses include self enrichment, gambling, and partying.
Is the cryptocurrency's team led by people who have a prior track record and relevant experience?
When competing in a new industry it is important to gain insight from those who have travelled the road before you. Innovation is great, but replicable by anyone with basic reverse engineering capability. Business savvy, wisdom, and proven formulas for success are what creates empires. If you find a team with leaders who exude these qualities, invest in them and hang on their every word.
Does the development team have prior commitments or is this a full time job to them?
Up until two years ago, I invested in dozens of cryptocurrencies whose development teams turned out to be nothing more than kids on summer break. I've yet to see a half committed development team achieve any level of success. On the other end of the spectrum, there are business professionals who know what it takes to be best in class. These are the kind of people who will work from 5am to midnight without asking for credit, just to benefit stakeholders. If you find a team like this, invest in them.
Branding with widespread appeal.
Branding is one of the most important aspects of a business, and cryptocurrency is no different. By branding ineffectively, a business risks relegating themselves to a niche market, because they lack the required broad based appeal to become mainstream. Many cryptocurrencies have intentionally targeted niche markets through branding, isolating themselves from other potential markets. A very select few are doing well at breaking into their target market.
Transparency, Accountability and Ethics
A person who goes by the pseudonym 'Satoshi Nakamoto' released Bitcoin in 2009. There is a great deal of speculation around the matter, but the reality is had it not been released under a fake name, Satoshi might be prison right now and Bitcoin may have never gained traction. Bitcoin aside, when cryptocurrency development teams refuse to use their real names, chances are they have something to hide or are not committed for the long haul. It is essential to know who you're investing in - If a currency developers Facebook timeline is full of drunk photos, don't trust them with your money! Remember, it's due diligence, not stalking.