Crypto Asset Valuation: A Guide to Fundamental Analysis for Altcoins

SPONSORED POST*

Diving down the world of altcoins can be risky. The big names like Bitcoin and Ethereum are more or less solid—And still prone to market mood swings. Altcoins have those mood swings and so much more that adds to the overall risk.

For example, they could be scams or the team behind the altcoin might be lackluster.

Incidentally, being able to correctly determine the true value of an altcoin is a skill that anyone wishing to invest in it needs to have. This guide will get you started on your journey to evaluate altcoins better.

How to Analyze Altcoins?

When you want to size up an altcoin, think of it like window shopping with a few extras.

Roughly speaking, you want to check the team behind the curtain and get cozy with the altcoin’s actual purpose of use case. You also want to take a closer look at the community and how active it is. Looking at the tokenomics and coin distribution is also vital.

Even with all that, fake projects can scam unsuspecting users and it’s all a matter of experience. That’s why we suggest you start slow and small with your altcoin investments, especially in projects that are very new.

There are a lot of reputable platforms providing valuable help with cryptos, offering insights into the altcoin market with the help of new developments, updates, and even expert analysis. This is crucial for you to know in order to uncover legitimate cryptocurrency projects, gauge their potential growth, and tailor your investment strategy accordingly. 

Also, it’s important to know that altcoins, which are not currently listed on major websites like Coinbase, CoinMarketCap, CoinDesk, CoinGecko, and Binance, are high-risk.

If you’re thinking of investing in these (such as through an airdrop or initial coin offering), you need to double down on all checks that we mention below because it’s easy for the team behind the project to disappear overnight or to steal your money with what is called a rug pull.

Getting to Know the Team

Altcoins aren’t just made by machines; they’ve got real people steering the ship. Take a moment to Google the team members. LinkedIn is your friend here.

Good teams create good projects. If the team behind an altcoin project sounds solid, then the project has a better chance to succeed. Poor teams or projects with no public team can get sidetracked or abandon development in the middle of the rollout.

You don’t need to become a detective; just check if they’ve got a solid background.

Have they worked on other successful projects? Are they real experts in the field? You wouldn’t buy a car without knowing who’s driving, right? Same logic here.

Finding Out About the Use Case

Altcoins, they’re not just digital coins; they’re tools with a purpose. So, ask yourself, what’s the point of this altcoin? What real-world problem is it trying to solve? 

More often than not, the use case of an altcoin determines its value in the real-world scenario. It’s also instrumental in ensuring the longevity of a project. If it’s just a copycat coin with the same benefits you get with another, larger project, then it might not be the best investment.

The most reliable way to ascertain if there’s a real use case or not is to read the whitepaper. If the whitepaper outlines a realistic problem and a practical approach to solving that problem with the use of the coin or the ecosystem, then it’s a good project.

You’d be surprised to know that the vast majority of the thousands of altcoins have no real-world promise or are just a copy of another coin. They naturally fail, sometimes within a few months of being listed—While others never see the light of day.

There are over 1.8M coins listed on CoinMarketCap, for example. Of course, not all of them have a good use case!

Gauge the Community’s Activity

Communities are the heartbeat of altcoins. Check out forums, Reddit, Twitter, or wherever the altcoin enthusiasts hang out.

Is there a buzz? Are people talking about it, sharing news, and helping each other out? 

But remember, not all communities are equal. Some are just hype machines with bot accounts, while others are genuinely passionate about the project. 

The Tokenomics Tango

Tokenomics might sound like a funky dance, but it’s just a way of understanding how the coin works. Take a look at the total supply. 

Some coins are essential for the blockchain platform or the larger ecosystem of the project to work. On the other hand, some coins are just there to look pretty. Scarcity makes coins more valuable so you have to keep an eye on the true tokenomics of a coin to correctly determine its value in the real world.

And don’t forget to check if there’s a plan. Sometimes, developers are just winging it. Typically, you’ll find a roadmap on the website of the project.

If it looks believable or if it can be cross-checked, then you can go ahead. If it doesn’t, you might want to avoid the altcoin. Worse yet, if there’s no roadmap or even a proper website, it’s not worth investing in (at least at this point).

Wrapping Up

To wrap it all up, we’ll leave you with some security/risk tips:

• There are no guarantees. Don’t invest what you can’t afford to lose.
• Scammers lurk everywhere promising official support and free crypto. There is no free crypto and most projects don’t have official support.
• Don’t go all-in on a single altcoin. Diversify your investments especially when it comes to newer altcoins.
• Ensure the project has a good website, detailed whitepaper, credentialled team, active community, and a real-world use case that’s not a copy.

*This article was paid for Cryptonomist did not write the article or test the platform.