The crypto market is characterized by cycles of euphoria and mania, followed by rationality and depression, often tempting investors to allocate a few hundred euros towards emerging blockchain projects with the hope of achieving disproportionate value increases relative to the market (such as Bitcoin). This approach is highly risky, requiring impeccable timing or insider knowledge for success. However, a rational methodology exists, and this article aims to offer insights on selecting your ‘gambles’ while avoiding outright scams.
Firstly, if you’re seeking phenomenal returns, overlook the top 50 cryptocurrencies, as these are already valuable and unlikely to yield 10x returns. A useful resource is link, which categorizes cryptocurrencies by their use case and objectives.
Tip One: Opt for diverse projects across various categories. The rationale behind this is that returns are not solely dependent on a project’s merit; oftentimes, a category’s hype plays a significant role. For instance, at the beginning of 2021, DeFi, especially decentralized exchanges and yield farming, followed by NFTs, were the hot categories. Choosing the right category often led to success. Currently, categories I find intriguing include:
– Smart contract platforms
– Oracle (data availability)
– Real world assets (integrating real assets into the blockchain)
– GameFi (blockchain-based online gaming)
– GambleFi (crypto-based online betting)
Tip Two: Preferably, the best projects are those that are relatively older, which might be less appealing due to heavy selling from seed investors and project managers, but possess innovative blockchain technology with significant potential. This usually means there is an existing user base, low inflation, and ample opportunity to attract new investors. An example is UMA, which offers oracle data based on user contributions. It was relatively unexciting until it introduced a tool capable of capturing value that would otherwise be lost to MEV bots (arbitrage bots exploiting blockchain activity). The price of UMA averaged around €1.80 in 2023, soaring to €5.20 following the tool’s announcement.
Tip Three: Accessibility is crucial; a token with limited accessibility is unlikely to appreciate quickly. It should be listed on multiple exchanges and possess a degree of liquidity.
Tip Four: Explore professional portfolios within the categories at: Link. Don’t attempt to outperform professionals, but consider their selections as a foundation for your decisions. This approach is straightforward, more likely to succeed than going it alone, and significantly reduces the risk of scams, given the professional endorsement.
In summary, focus on accessible projects with small market caps, substantial volumes, and professional backing. Diversify across different categories to enhance your chances. Be mindful of transaction costs, as frequent trading can erode profitability. Hence, choose about four projects and commit to them. Also, be ready to take profits; a coin that has already achieved a 10x increase is less likely to repeat this performance compared to one that has doubled.
