How to get a head start on the hungry crypto crowd
It is incredibly frustrating to read an enticing post on Reddit about a potential cryptocurrency moonshot and then discover a few seconds later that the price has already risen by over 100% in the last 24 hours. That unfortunately is the case with many of the tokens that are discussed on Reddit and similar platforms. Let’s take a look at a real life example…
Rowan Energy with the ticker $RWN
$RWN was featured on a popular ‘pump’ community on Reddit recently. Although these pump communities are littered with many self-serving posts, there are always a few gems hidden amongst the muck. $RWN appeared to be one such gem.
When I read the post for $RWN, I was immediately excited. I could see clearly how blockchain technology could be utilized to solve a real-life problem, or in this case, an opportunity and profit from it. More importantly, it was also crystal clear how the token would capture value, something many projects lack but gloss over.
A quick summary of Rowan Energy
Rowan Energy is the world’s first community-led green energy blockchain. Rowan enables domestic and commercial owners of rooftop solar to sell their generated energy to other consumers P-2-P bringing in the best returns possible for solar and the cheapest green energy on the market. This is enabled through the $RWN token, bypassing big energy suppliers and ensuring the customer retains more profit (>70% more). The closest comparison is $EWT.
$EWT Price: ~$16
$EWT Supply: 100m — more than double $RWN’s
$EWT MC: ~$500m
The Team: CEO, David Duckworth, has significant experience as a network security specialist, engineer, analyst, blockchain and entrepreneur. Worked for employers and clients including Deutsche Bank and Aviva.
A really great in-depth read on the project and the tokenomics can be found here.
(Thanks to u/_Camp)
To learn more about the vagaries of Reddit read our article: Reddit is the party over or is it just the beginning?
Join the CryptoQuestion Reddit community — Moonshot Monday here
I was excited. Surely, not many other people had acted upon this post, I thought. Was it possible that the dull energy sector was going to gain the attention of the average crypto investor more interested in memecoins? How wrong I was…
In the last 24 hours, the price was up by 88% and in the last 7 days 1,118%. The million-dollar question was; had I missed the boat?
A reasonable question and one that puzzles most of us involved in this rapidly moving market. It has to be said that the cryptocurrency market is like no other. Prices rise by 100% in a day and 1,000% in a week without anyone really paying too much attention. This won’t last forever. Every market matures eventually. However, you would have to be Mother Teresa or the Dalai Lama to ignore the potential of this market.
There is no cut-and-dry answer to that million-dollar question. In our case, we love this project, and we will keep it under review for any price weakness, using that as a buying opportunity. There are bound to be some sellers after the recent price increase. However, we take the attitude there are plenty more fish in the sea.
The reason why we brought this example to your attention is that it provides a great lesson for all of us when attempting to identify that 100X coin that we are all on the hunt for.
Rather than following the crowd and investing in anything it deems worthy, a better strategy would be to add a filtering system to our selection process. That first step in our due diligence armory is to examine the price performance over the last 7, 14, 30 days, and 1 year.
The importance of price performance
Most cryptocurrencies that have had their price ‘pumped’ up by an influx of buyers have seen massive price increases in a short period of time. Increases of over 500% are commonplace.
We are all looking for these types of opportunities, and in one or two isolated cases, some of these coins still represent good value. But in the main, many of the coins that experience rapid price increases have few fundamentals and, in the worst cases, are outright scams.
The problem with rapid price increases is that the price becomes more volatile with profit-takers rushing for the door. That is why it is important not to pile in once you have identified the cryptocurrency of your dreams. Take a breath and then check the recent price performance.
Tune into our weekly podcast on iTunes Apple Podcast — MoonshotMonday — where we discuss three undervalued cryptocurrencies
The memecoin phenomena
One of the most popular words in the crypto moonshot hunters vocabulary is ‘memecoin’ closely followed by ‘rugpull’*.
What are memecoins? They are mostly associated with Dogecoin, the first cryptocurrency that used a meme.
A meme is an element of a culture or system of behavior that may be considered to be passed from one individual to another by non genetic means, especially imitation.
A humorous image, video, piece of text, etc., that is copied (often with slight variations) and spread rapidly by internet users. (Source: Oxford Languages)
A memecoin could be defined as a joke that turns into a cryptocurrency. Dogecoin, the inspiration for many, has a market cap of $7 billion. You can even buy a Tesla using Dogecoin.
Multiple memecoins are sprouting up every day, many of them scams. The playbook is simple. The founder/s of the newly minted cryptocurrency parks his or her holding with Uniswap, the leading decentralized exchange, and then coordinates a mass campaign of pumping the price of his new GuineaPigCoin. He usually succeeds in exiting a good proportion of his holdings and moves on to his next coin, GuineaFowlCoin. This is not the case with all the memecoins, of course.
There are others such as Hoge Finance and Safemoon, which have seen price increases of over 65,000% in 30 days, that claim to solve a real-life problem. However, memecoins are for the speculator who thinks they can ride the wave and exit before they hit the rocks.
Due diligence system
We all have our own ways of analyzing opportunities, or at least we hope you do. If this article teaches us anything, it is to be the driver of our own destiny. That translates to finding our own opportunities and buying and selling at the right time determined by you and not the hungry crowd.
Here are a few other due diligence techniques which we should all use when selecting a cryptocurrency.
Does the business case for the cryptocurrency stack up? Is it clear how the token is going to be used as part of the solution? Many projects have a great idea, but it is not totally clear how the cryptocurrency is going to be utilized. Take XRP, for example, many of the payment solutions Ripple has designed do not even use its own currency. This is one of the most important questions you must ask yourself. Where is the demand going to come from? Is it reasonable that people are going to buy a random memecoin in order to buy and sell products and services or store value?
Is the project team featured on the project’s website, and do they have relevant experience. We tend to avoid projects where the founders are anonymous, although there are exceptions, such as PancakeSwap, for example. If a team isn’t willing to put their name to a project, it tells you that they are hedging their bets at best. It would be wise to find another project. There is no shortage of choice.
Check to see if there are VCs who have invested in the project. There are some great projects backed by leading VCs worth a closer look. If a VC like Founders Fund has confidence in a project and also holds tokens, then you could be onto something.
Website and App
Check the project website and or App. How does it look? Is it easy to navigate? Is it littered with grammatical errors and typos? We have seen some appalling examples of websites that have been written in pigeon English and are still being relentlessly pumped by the community. If a project team isn’t capable of putting together a quality website, then it is unlikely they are going to succeed when it comes to gaining adoption from the wider English-speaking public.
One of the most crucial parts of the due diligence process is to speak to the users. That involves, in most cases signing up to the project’s Telegram channel and asking users any questions you may have about their project. Most are very helpful. Although remember they have a vested interest in giving you the answers you want to hear. But putting this cynicism aside it is a great way to understand a project and quickly see what the problems are with the platform and its future plans.
It has to be said that if you are attracted to a coin and find out that the only exchange where you can buy or sell it is based in Argentina, which you also discover has a poor track record of customer service, then this is probably a valid reason to avoid the coin. It is important when buying any cryptocurrency that you look at where you can trade it. If it is a smaller coin, you can probably buy it on Unswap, but bear in mind that buying $100 worth of a small cryptocurrency is likely to cost you $50 in fees (gas), albeit a small price to pay if the cryptocurrency rises in value by 1,000%. Usually, however, it has to increase by over 100% for you to break even, consider this before pressing enter.
There is a positive side to exchanges. If your cryptocurrency is emerging from the crowd as a potential winner, it is likely to seek a better exchange, that alone will help the price. Look at what happened when Cardano was listed on Coinbase Pro — the price increased by over 20% in one day. You can quickly work out the feasibility of this happening by taking a look at your target cryptocurrency’s Telegram channel and seeing if there is any discussion on this topic or even starting that conversation yourself.
View our weekly Micro Cap Watch List here. We publish a list of small to micro cap cryptocurrencies which we feel are undervalued, including NFTs and ICOs.
A motto worth remembering
It is often said in the world of finance, why invest in something at tomorrow’s value today?
It wouldn’t be rash of us to say that with only a handful of exceptions, the cryptocurrency market is valued based on its future potential. Cardano is a prime example of this valuation conundrum. Valued at $36 billion with few users and without a fully functioning platform, the value is in its potential. The question you have to ask yourself is, are you willing to pay $36 billion now for something where the risk of achieving that value tomorrow is far from certain? That is why we prefer to find opportunities where the value today does not reflect the potential value tomorrow. That is where the real opportunities are, hidden in plain sight from the crowd.
If you wish to discuss any of your own moonshots or see what the community is tipping or even warn about scam coins join our Telegram channel here.
*Rugpull — A type of exit scam
Not Financial Advice
This article does not constitute financial advice or a recommendation to buy in any way. Always do your own research and never invest more than you can afford to lose. Investing in cryptocurrencies is high risk, and you could lose 100% of your investment. The article should be treated as supplementary information to add to your existing knowledge.