Bitcoin has always been the best cryptocurrency in the world, but thousands of alternative cryptocurrencies, or altcoins, have been created, all competing or claiming to be the next big thing.
Evaluating the performance of a crypto asset should go beyond its recent price movement.
Evaluating the value of each altcoin in the short and long term can be intimidating, as there is a lot of research to be done, but there are some key factors to make your valuation more solid.
In this article, we'll give you a five-step process that can help you gauge value when looking at new altcoins for grabbing.
Since its inception in 2010 and subsequent explosion in popularity, Bitcoin has been the market leader in the cryptocurrency industry, with market dominance reaching 80 percent on several occasions over the last decade. Although BTC is synonymous with the cryptocurrency industry, it is slowly changing with several blockchain-related innovations emerging from crypto projects outside of the benchmark crypto asset.
In just a year after the creation of Bitcoin, many alternative cryptocurrencies, also known as altcoins, were created. Inspired by Bitcoin's blockchain technology, these altcoins typically introduce different blockchain use cases than the original Bitcoin iteration. Some of these altcoins can even be considered direct descendants of Bitcoin, at least in terms of being created as a derivative crypto asset after a major upgrade to the Bitcoin blockchain.
There were only a handful of altcoins in the early 2010s. However, since Ethereum's debut in 2015 and subsequent growth in popularity in 2017, the number of altcoins available in the market has grown significantly. Ethereum's smart contract technology has made it easier than ever for projects to create their own cryptocurrencies, leading to the formation of several startups that are still major players today.
As Bitcoin continues to hold a sizable, but slowly diminishing, lead, the global cryptocurrency market has matured to a point where you can now assess the value of each altcoin in addition to comparing it to Bitcoin.
Bitcoin vs Altcoin
At first glance, it’s easy to assume that Bitcoin’s market dominance makes it the only worthwhile crypto to invest in. With a decade-long track record, the ongoing financial revolution it has ushered in, and the growing influence it has wielded over the most traditional of financial institutions, Bitcoin is set to remain the market leader for some time to come, barring any extraordinary events.
Notwithstanding, the smash of the overall crypto market has made space for notable altcoins to make their case as major players. While Bitcoin has the attention of the most fundamental of cryptocurrency traders and owners, altcoins have the opportunity to expand their reach and influence. This has led to multiple prototypes where several altcoins have produced growth that has surpassed Bitcoin’s.
Notwithstanding, each altcoin comes with its own set of strengths and frailties, raising questions about its long-term viability. Multiple altcoins, particularly those created in the crypto market ’s smash epochs, started out strong but have since crashed due to one factor or another. Several of these have been labelled as outright exit scams, deceiving those who do not perform proper due diligence on their investments. In this theme, we’ve prepared a detailed guard to help you separate the worthwhile tokens from the rest.
Five Factors to Look At When Assessing an Altcoin
While no single technique stands out in terms of adequately valuing crypto worth, there are a sprinkling of vital factors that can reveal a lot about an asset’s value and ascent. Under each factor, we also supply several key questions that you can use to assess an altcoin’s virtues.
Altcoins are normally created with a specific set of use cases that aim to work a problem in any given sedulousness through a blockchain result. An altcoin with no clear function is unlikely to have a future as a store of value. The problem with some altcoins that were initially hyped but sometimes flamed out is that they end up resulting in a problem that does not subsist. Other altcoins say they want to be bigger than Bitcoin, which probably should be a red flag for implicit investors.
Here are a couple of questions to guide your examination.
-Does this altcoin do anything substantial other than replicate an around coin?
- Is thealtcoin's goal both useful and achievable in the near future?
Developers and Support
In the same way that you assess a company ’s value on the strength of what its brigade has done to generate business, you should also keep a close eye on the brigade that operates the crypto projects behind the altcoin you ’re delving. You can start by checking the brigade’s developers and their track records. Beyond the resumes, you should also be equal to see how much work they've put into the projects, if their expenditures have led to positive results, and if they are working hard to inform the public about the progress they’ve made.
Ask yourself the following questions
-Are the developers able and esteemed?
-Does the band laboriously work on noteworthy updates for the crypto blueprint?
- Do they strive to amend their product and regularly keep in touch with investors?
Keep in mind, this factor may be added for new altcoins that have yet to make an impact in assiduity. But if an altcoin has been around for quite a while, the coming factor will probably be more important.
History and Fame
Sometimes, a crypto ground plan and its associated altcoin may have crew members with prestigious CVs. Notwithstanding, that’s not a guarantee that this particular altcoin will be successful. Sometimes, there are events in an altcoin’s history that end up affecting the positive assessments you had about that crypto asset.
Guard of the red flags that may come up as you answer the following questions.
-Have there been any opprobriums in the coin’s history?
-Have any security breaches been exposed?
-How long has the altcoin been on the market, and how historic has its value increased since either?
Unless you’re the type of investor who's greathearted enough to venture into extremely new projects and can tolerate high-imminence investments, you should also look into the altcoin’s open market performance. In addition to delving into the price history, you can check the altcoin’s market health through its trade volume. Simply put, when other people trade evolved quanta of an altcoin in the market, that altcoin is in good shape. It would be great if people found real use for that altcoin.
This factor raises two critical questions
-How multiplex people are presently using the altcoin?
-Is the altcoin traded on any major exchanges?
Notwithstanding, at this point, you like what you see in the altcoin you’re probing, After all, a promising altcoin that’s thorny to access is likely more of an inconvenience than a proper asset. Altcoins that are easy to acquire are more accessible to the public and more likely to gauge the bigger markets.
Check the following
-How would you purchase the altcoin?
-Will you be capable to buy that altcoin via credit card, bank transfer, or P2P?
You may be better off sticking to your current plan in the meantime until you see an altcoin worth your investment, if the answers to the aforementioned questions are bad.
When valuating an altcoin’s long-term value, you can add an untold number of further factors to check, depending on what’s spendy for you. You can also take cues from factors considered by some of the most well-known companies in the cryptocurrency space. In numerous cases, altcoins are subject to a progressive status of scrutiny.