The cryptocurrency space is full of opportunities for those willing to do the research and identify potential winners early. While Bitcoin and Ethereum will likely remain the largest coins for the foreseeable future, that does not mean there is no money to be made elsewhere. The altcoin market is a veritable treasure trove waiting to be mined, with prospective gems just waiting to be unearthed and polished into precious stones. However, like real gem hunting, it takes work to separate the fool’s gold from the true diamonds in the rough. This article will provide a guide on how to identify promising altcoins and get in early before they appreciate greatly in value.
Understanding the Altcoin Landscape
To start gem hunting, it is important to understand the lay of the cryptocurrency land. As of this writing, there are over 7,000 altcoins listed on CoinMarketCap with a combined market cap of over $300 billion. However, the vast majority of those coins are little more than ideas or experiments with no real users or development progressing. Looking solely at market cap rankings can be misleading, as many coins obtain high rankings due to low circulation rather than true value.
The altcoin space moves fast, with new projects launching regularly and old ones fading into obscurity just as quickly. It is a dynamic, evolving market requiring constant research to stay on top of industry trends and identify the projects most likely to succeed long-term. Some key factors to pay attention to when scanning the altcoin landscape include:
- Target Market/Use Case – What real-world problem is the coin attempting to solve? Coins focused on niche markets or innovative use cases tend to have more potential than vague concepts.
- Team Credentials – Check the background and experience of the core development team. Established teams with a track record tend to fare better than anonymous or inexperienced ones.
- Backing and Partnerships – Does the project have support from VC firms, exchanges, or other major players in the space backing it? Partnerships demonstrate real-world viability.
- Token Utility – How will the native token be used within the ecosystem? Coins lacking practical use cases often struggle long-term.
- Technology – Review any white papers or codebases if available. Innovative technologies have more potential, but should also be evaluated for long-term feasibility.
- Community & Marketing – How engaged is the current community? Consider social following and discussion levels. Strong communities tend to drive long-term adoption.
By gaining a broad understanding of the overall landscape and these individual evaluation factors, crypto sleuths can start identifying the most promising gemstones in the rough. From there, it is time to get digging.
Phase 1: Research Hidden Treasures
Once a foundational understanding of the market is established, the initial research phase of gem hunting can begin. This phase primarily involves combing through forums, blogs, and social media to identify interesting new projects that may have long-term potential but have yet to gain widespread attention. Keep an open mind during research and look outside the top 100 coins, as the true gems are often still buried deep at this stage.
Some effective research strategies include:
- Browsing new project announcements on forums like BitcoinTalk, Reddit’s Cryptocurrency subreddit, and technology-focused sites like Hacker News.
- Following developers, venture capital groups, and crypto luminaries on Twitter for early insight into promising launches.
- Checking the ICO/IDO calendars of reputable launchpads for upcoming token sale details and white paper review.
- Speaking with specialists in various crypto niches to get their take on what projects are gaining real traction among developers and communities.
- Watching videos from influencers and technical analysts explaining new projects and their potential worth further investigation.
Quality research at this phase should point the crypto hunter towards several coins that warrant deeper digging. Make notes on potential gems’ key details, roadmaps, and noteworthy supporters for follow up. While the altcoins unearthed in stage one likely have promising ideas and teams, their true value remains unproven. Thorough vetting is needed to determine if found projects are fool’s gold or the real cryptocurrency diamonds.
Phase 2: Conducting Technical Evaluation
Having identified a crop of altcoins with novel ideas and potentially strong long term prospects, it is time to evaluate these treasures more carefully through technical review. The second research phase zooms in on coding, economics, risk factors and benchmarks for success. Its goal is to ascertain a project’s technical merit and the likelihood of it delivering on its vision.
Among the key factors crypto prospectors should research at this stage include:
- Code Quality & Documentation – Review code repositories like Github for code structure, readme files and documentation quality. Are things logically organized, named and explained? Sloppy code is a red flag.
- White Paper Thoroughness – Read white papers closely and check claims against reality. Beware of projects that make vague or unrealistic promises. Quality explains how, not just what.
- Token Mechanics – Audit the tokenomics model – is it deflationary/inflationary and how does this impact long term value? Are incentives aligned for adoption?
- Risk Factors – All investments carry risks, but some projects have larger regulatory, technical or competitive risks to consider.
- Benchmarks For Success – Determine quantifiable metrics like user growth, developer activity and other milestones that demonstrate the project is delivering on its roadmap.
- Competitor Analysis – Research what comparable projects exist and how the focal coin plans differentiate itself to gain lasting traction.
Technical evaluation weeds out the altcoins with pretty ideas but poor fundamentals unable to last long term. Look for projects advancing real innovation or solving significant problems through a quality technical implementation positioning them for uptake. Those passing this stage with flying colors point towards likely cryptocurrency diamonds.
Phase 3: Assess Community Traction and Potential Growth
Making it through initial technical vetting still leaves open questions around a project’s market potential and the strength of its backing community. The final research phase assesses traction and involves evaluating real-world engagement signals cryptocurrency explorers should be on the lookout for. Projects with strong communities behind them are far more likely to gain adoption momentum and appreciation over time.
Key metrics to investigate at this stage include:
- Social Media Growth – Check Twitter, Telegram, Reddit and YouTube for strong and steadily increasing follower counts. Real engagement bodes well for uptake.
- Forum Discussion Levels – High volumes of quality technical discussions on forums like BitcoinTalk points to a dedicated community.
- Exchange Listings – Cryptos listed on quality centralized and decentralized exchanges see more volume potential and accessibility.
- Media Coverage – Have any quality blogs, news sites or influencers covered the project highlighting its potential value?
- Developer Activity – Monitor Github commits and contributors, as ongoing dev work supports future progress.
- Community Events & Meetups – Organized local meetups or global conferences demonstrate community strength.
- Tokenomics Effect – Check if positive price action or network usage spikes aligned with strategic token releases and incentives as designed.
Taking the community temperature provides context around a project’s potential user base and whether interest and growth are outpacing competition. Those coins passing the traction assessment with strong real-world metrics emerge as the most likely long term value leaders in crypto – true diamonds ready to shine soon with HODLers primed to reap outsized gains.
Cashing in Your Crypto Gems
Once thorough research points to several altcoins as being fundamentally strong with solid communities, the time has come to start unearthing real treasure. Careful cryptocurrency prospectors can begin slowly acquiring positions in the most promising gems identified. With patience, soon these shiny cryptocurrency diamonds in the rough will be polished to a glittering brilliance for years of sparkle and investor rewards.
Also read: What is Crypto Betting?
A few tips for maximizing gains include:
- Diversify holdings across the top research picks in case any fail to pan out.
- Consider dollar cost averaging in over time vs lump sum investing to mitigate short term volatility.
- Set ambitious yet achievable long term price targets based on a project’s potential to 10x, 50x or more with success.
- Don’t be greedy – take initial profits on major rallies while letting runners keep running. Redeploy capital into other discoveries.
- Monitor positions and reevaluate if changes emerge diminishing a coin’s potential. Sell and reinvest where warranted.
For those willing to put in the hours of research, true cryptocurrency gems can be found before wider recognition inflates their prices dramatically. Patience and due diligence lets fortunate crypto prospectors unearth shining altcoins ready to make them wealthy. With care, the rewards of altcoin gem hunting can last lifetimes.