What Should You Think About Before Buying Any Altcoin?
According to Statista as of 2021, there are over 6,000 altcoins out there. But with so many to choose from, how can you be sure which ones are worth buying? The obvious answer is of course to follow what’s likely the most common piece of crypto-related advice: Do your own research (often abbreviated as DYOR). As part of that research, here are a few recommended considerations to think about and look into before purchasing the altcoin of your choice:
Purpose:
When was it created? Why was it created? What makes it unique? Who are its competitors? What is the ultimate goal of the project? What is it trying to solve or help with? How will it be achieved? Does it seem feasible?
Legitimacy:
Who created it? What’s the team like? Do they have any prior experience or reputation in crypto or a similar field? Does the project have a website and whitepaper that outlines all its details? Overall, does it seem like a long-term project with long-term and achievable goals?
Community: How large is the project’s community? Do they have a decent social media following? Are their followers organic (real people) or bots? What’s the general community sentiment like? Are they active on social media?
Top Technical Things to be Considered Before Buying any Altcoin?
Technicals:
Where and how do you buy it? Which exchange(s) is it available on? What does the price chart look like? Is it in an upward or downward trend? What’s the trading volume? What’s the market cap? Now that you’re armed with some solid tips to think about when browsing potential altcoins to buy, here are a couple red flags to look out for:
False promises:
As a rule of thumb, if it seems too good to be true, it usually is. Any project promising 100X returns or using an excessive amount of “to the moon”-type language that primarily emphasizes the vast riches you’ll receive after investing, and not the utility and capabilities of the project are more often than not illegitimate and simply trying to talk up their coin.
Anonymous teams:
While there are plenty of legitimate projects out there with pseudonymous leaders such as Shiba Inu Token (SHIB) and even Bitcoin (BTC), you should still be wary of teams that are completely anonymous. As a show of legitimacy and confidence, many altcoin projects will have no issue with sharing the names and faces of their founder(s) and team (a practice known as doxxing).
Top wallet ownership:
Who owns the majority of the coins? Is most of the supply in a few large wallets or spread out throughout multiple smaller wallets?
Does the team own much of the supply?
If only a small number of large wallets hold most of the coins, that’s usually an indicator that the project is dominated by a few whales who could easily dump their coins and/or contribute to major price volatility over time.
Closing thoughts:
Crypto is still very much in a “Wild West” stage of its life. Scams, Ponzi schemes, rug-pulls and the like are unfortunately all too common in this evolving space. As always, be careful, DYOR, and use your best judgement when it comes to making an investment of any kind. Good luck!
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