#2 Picking winners, losers & what to HODL
Building Crypto Today
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Important terms to know coming into this: ICO (initial coin offering), VC (venture capitalist), HODL (hold)
There are a ton of varying perspectives in terms of what you should be looking at for cryptos to buy, sell, HODL, or initially invest in via ICO. A popular theory is that of the the traditional VC; I think it’s wrong. Wrong might be a bit strong, but in general, it’s not quite accurate because of how new the industry is. Crypto is just different. We’re average people investing in these new companies, we’re VCs. When we’re investing in an ICO or any token for that matter, we are acting as a VC.
HODL or not, this is why we’re different
Some ICOs have been very strict about taking only accredited investors, that is to say, rich people. There is nothing wrong with that, they have a right to do their own thing as long as they’re not harming anyone. They’re missing a massive market by excluding so many people. This is where and why crpyto diverges from traditional investing. When you have 100K different people investing anything between $1Mil USD to $20 USD, you don’t need any incredible marketing staff, you just need to let people come in, then talk about what they’re so excited about. This is a driving factor of most crypto, someone tags a coin on Twitter and the price jumps or dumps because people didn’t realize it existed or simply forgot about it. When you limit your investors to those in the upper-middle class of Americans, you pretty well push out 3/4 the world. By allowing regular people in, you significantly increase your free advertising and decrease your need for the traditional VC needs.
What to look at when making your buy, sell, or HODL evaluation
This is a foundational piece, does the team actually have anything to show for themselves before this token? That doesn’t mean they can’t be amazing, but it does mean to look a lot closer. Who is on their team page? Did they list Vitalik as an adviser, you might want to contact these advisers on LinkedIn and ask them about it. Some teams will ask someone a question at a conference and just throw their name/picture up as an adviser. That’s not only disingenuous, but very suspect.
Is this a market that would actually benefit from blockchain, a new protocol, or token? Real Estate is a good example of blockchain’s inability to disrupt and take any meaningful portion. The roots run so deep between government and agents that law typically codifies who can buy or sell anything and usually prescribes the exact process that must be used. Blockchain is probably a decade away from that. Where is can disrupt for instance is blockchain insurance and like with Proof or retail credit, as massive industry like HIVE.
How broad are they looking to go? Is this a new blockchain or token attempting to take over for Ethereum or is it tackling a very specific problem and allowing space for expansion in the future. HIVE is a perfect example as it tackles the problem of credit rating of retail outlets and provides that to financiers who wish to lend the money as the retailers need the loan to purchase products from the factory. Retail credit is a huge industry and the cross-border nature of a lot of the production systems makes it a massive challenge. Now an average person can become a financier or a retailer seeking a short-term loan for goods, building your retailer credit score for paying back on time with significantly less administrative fees and next to no chance of identity theft.
Does the project hope to one day outgrow their niche? Are they thinking ahead, do they have the vision to see the future when their current project doesn’t extend to needs? EOS is a great example of this. Dan Larimer bounced from BitShare to SteemIt to EOS, leaving each one when it couldn’t meet his needs anymore or simply ran out of money. While his EOS project seems great, I lack faith in his ability to see the project past any barriers and therefore not plan for the long-term. I might be wrong, hopefully I am, but that speaks to his inability to ensure the project can expand when the time comes.
EVERY good team has good communications. I haven’t found a solid project yet that lacked a good comms channel and succeeded. Before you put any money into ANY crypto, go to their Slack, Telegram, or even Facebook page to see how active they are. I love my project teams, they are always communicating, even with the morons who didn’t read anything before investing, then complain once the ICO is over and funds locked for a week. Good teams always have a communications channel that they personally respond on. If they won’t answer a question you have within a few days, don’t put a penny towards them.
This is the 2nd most important thing to look at. Did they take the time to spell check it? Did they ensure it made sense, covered technical details rather than just marketing buzz? That’s a good indicator of whether it’s a HODL or pump & dump. If you’re not the technical type, it’s ok, just give it a thorough read over to ensure the messaging in the campaign is consistent with the messaging from the paper and the tech sounds as legit as you can surmise.
This has a lot less to do with the coin or project and more to do with ease of consumer use, more specifically yours. The biggest concern for you should ALWAYS be the ability to move your crypto anywhere you want at anytime. That is one of the foundational principles of crypto, being your own bank, which also means not having to ASK a bank or anyone to move your crypto. If you don’t hold the private keys, like Coinbase, you don’t actual control your crypto. Something like NXT, I made a HUGE mistake in selling right as it finally peeked up to where I could make an even break. I held it for several months and wanted to leave Bittrex, but it requires a destop wallet, which I don’t like. ERC-20 tokens are AMAZING! I can easily put everything in a MEW or on my Ledger and be good to go. I don’t want to have to worry about a dozen different wallets and I expect you don’t either. Stick with HODL tokens that you can put into your own wallet. BTC, ETH, ARK, and a few more have Ledger wallets that you can use with ease. Don’t let your crypto stuck on an exchange just waiting for a hack and don’t sell because of a desire to move exchanges, right before a 75% spike like me… Want to learn about some wallet options, we’ve got a section of our How to Get Started with Bitcoin page for that.
When it’s all said and done, if you’ve invested in an ICO, don’t freak out after the dump. A lot of people invest solely to turn a quick profit. Just HODL for a month or 2 and you’ll typically see the value return to where it belongs.
If you’ve got questions or comments, want to see something specific covered, or want to come on and join the conversation, give me a shout at Josh at Ritchey.Space
Looking to learn more about starting in crypto, check out the ultimate beginner’s guide.
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