Bitcoin and the mob of alternative coins that followed it have turned plenty of average investors into millionaires. If you bought Bitcoin a year ago and held it until today, your return would be about ten times what you put in.
With Bitcoin unlikely to make another 10-fold increase this year, bold crypto investors are looking to invest in new coins in 2018. But with more and more ICOs and proposed forks every day, how are value-based investors supposed to pick the winners from among the crowd?
Finding Value in Speculative Markets
Some crypto investors rely almost entirely on charts. They watch the price, trading volume, social media mentions, and Fibonacci retracement (you know, “candlesticks”). Then, they consult the crystals, burn a ritual sacrifice, and make a trade. Not my cup of tea, but a strategy that has worked out for some. High volume coin traders can make quick returns on little known coins. However, these trades are extremely risky.
Some new coins are outright scams that leave investors penniless. Even among the more legitimate coins, the biggest losers on the cryptocurrency exchanges can drop to half their value – or less – in any given day. This is not an easy position for any investor to recover from. So, rather than betting the farm on Tron or Dogecoin, consider investing in crypto coins associated with something that generates economic value in the real world.
Always Bet on the Winner
Tech entrepreneurs launch new virtual currencies every day. Some are created through Initial Coin Offerings, and others are forked from the blockchain ledger of an established coin. These add up to thousands of new cryptocurrencies each year, and they can’t all be winners.
Value-based investors look beyond the market performance of a new coin. They consider the team behind the project, the nature of the product or service the new coin offers, and how transparent the company is about its operations. This type of due diligence can be incredibly challenging in the fast-paced world of cryptocurrency trading. So, many value-based investors are looking at upcoming forked coins for their next big break.
In many ways, the forking phenomenon is much like the ICO craze. There are many, many new coins planned through hard forks, and relatively few of them will be winners. Some of the recent forks appear to be basic money-making scams, just like many ICOs. However, for the time being, picking the winners from the losers is easier said than done.
When it comes to risk-and-return, forked coins have one huge advantage over ICOs: the airdrop. Unlike putting your money into an ICO, you don’t have to risk your hard-earned coin for the chance to hit it big when someone finally builds the better Bitcoin. Instead, just keep Bitcoin in a secure personal wallet and claim valuable forked coins once their prove themselves on the open market.
Ever since Bitcoin Cash hit the bigtime, the crypto community has paid more and more attention to forked coins. If their underlying technology is sound, some upcoming forks will create real value in a marketplace that has been plagued by speculation and FOMO-driven price swings.