Checklist for finding value investments in crypto
There are tons of crpto projects and over 10000 coins that you can trade and invest in . Finding value in this crypto haystack can be a very difficult task . There have been lot of failed project, pump and dumps and outright money grabs .There would be many more in future ,but underneath the hype and the fuzz there is value being created .
This is a short checklist that I follow to filter project that have some value to them . This is my mental model before putting my money to work .
- Is crypto right for me .
Investing in crypto is extremely risky . It has lot of volatility and can have drawdowns of 80 to 90% . Crypto investing is akin to venture investing . It should fit in your overall financial plan and you need to have the risk taking appetite to stomach its volatility . Please check with your financial planner before investing in any crypto .
2. Should I just stick to Bluechip cryptos like Bitcoin and Ethereum .
Even having a small allocation to already scaled projects like Bitcoin and Ethereum has also provided better risk adjusted returns in a diversified portfolio . So is there any needs to go down the rabbit hole of non scaled projects . Non scaled newer projects would have higher volatility and scaling risk associated with them .
3. Is the crypto project trying to solve a crypto world / real world problem
Is the crypto project trying to solve any crypto world issues like energy consumption per trade , cost per trade , value extraction per trade etc . Is it trying to solve a non crypto real world problem , ease of financial access ,ease of value transfer , programmable smart contracts etc
4. Read the white paper and check the code .
Most crypto projects have public white papers and their code is open source . Read the white paper and code to find flaws . These flaws might cause you to lose money if someone comes with a better solution .
5. Check if the code is audited by a trusted third party .
There are third parties that audit the code . Check if they have audited the crypto project that you are considering . Bugs in the code can cost you money .
6. Check if the project is listed on coinbase .
Coinbase has one of the most strict requirements for crypto projects to list . Binance and other chains are more lenient.
7. Is the growth organic or is it influencer driven .
Is the user growth organic , user base increasing as they find value or is it paid growth by using influencers. A flag is random people / celebrities promoting the project or just price growth but not user growth.
8. Does it have a good treasury of funds .
Most project need continuous improvement and have to hire developers . They maintain treasury to do it . You can check how much treasury they have.
9. Developer community support .
Some crypto projects have large number of developers and community that helps them generate ideas and execute those ideas . This is a big plus
