Find coins with real value instead of buying into hype
A coin’s price can be broken into speculation and value, much like a stock’s can be. However, in the current state of crypto, in which most coins do not have a finished product yet, these terms adopt a slightly different meaning than in traditional finance. For this article, I am loosely defining speculation as “hype”, which is essentially the amount of marketing done (often with the goal of directly altering the price), and value as “technical progress”, which is a mixture of the usefulness of the project and their current progress toward implementing it. The balance between these two factors determines a coin’s long-term potential, and more importantly, when to buy in. Ultimately, coins that are priced based (mostly) on value are the best ones to buy, and are also the ones you are least likely to know about.
I will demonstrate this with two examples, one being TRON and the other being ChainLink.
TRON was the most recent hype coin, and is an example of a coin that was/is priced heavily based on speculation. It’s founder, Justin Sun, was largely the cause of this; he maintained a very active Twitter and constantly shilled his own coin, announcing announcements of announcements. Despite the large amount of press, the technology itself was unproven (besides a CryptoKitties clone) and did not even have a white-paper at the time.
— Justin Sun (@justinsuntron) January 2, 2018
TRON leader shamelessly shilling his own project
As a result of the hype, TRON skyrocketed in price over a short period of time. However, it shortly crashed back down to its pre-hype price. Most of the people who ended up buying it did so during the rapid run-up in price, and either had to sell at a loss, or are still holding it.
TRON’s bubble chart
This is precisely an example of a coin you should not buy (at the time when most people heard of it, early January), because its price was clearly dominated by speculation — without Justin Sun pumping up his own coin, this would not have went nearly as high as it did. Furthermore, since the coin had little in terms of technical progress, most people only heard about it during the hype run-up, and FOMO’d in during the worst time to buy it.
On the opposite end of the spectrum, we have ChainLink. Since most people have no idea what this is, ChainLink makes decentralized blockchain-agnostic oracles, which are an essential component to real-world usage of smart contracts. ChainLink (under the parent company of SmartContract) is ran by Sergey Nazarov, an industry expert on the use of smart contracts, and has a long list of impressive achievements that include building a prototype for SWIFT, and being named in the executive chairman of the World Economic Forum’s book on revolutionary trends. The project has a well-written white-paper, has had constant open-source technical development, and is nearing a Q1 initial release.
Despite all of these achievements, the ChainLink team has almost no social media presence and very little hype (outside of 4chan, which actively spreads misinformation to mask the project’s presence), so your average person has almost definitely never heard of it. The team deliberately does very little work to market its project to non-industry investors, and prefers a strict no-hype policy. They have however, been securing industry partners and marketing themselves to potential customers, and also maintain a helpful Slack channel for those interested. But because of its lack of public-facing marketing, ChainLink has a relatively low market cap and level of public awareness despite its great achievements.
Here, clearly, the price of ChainLink is dominated by its value, and it would be a great project to invest in. It has an obvious use case, and has a solid developer team behind it with industry experience dealing with smart contracts and oracle solutions. In future, after they release their product and are inevitably forced to do some marketing, the price is likely to explode once people are aware of its existence and their great accomplishments.
In these examples, we see that prices based mostly on speculation are artificial and subject to rapid decreases, whereas prices based on value remain stable and have the potential for large upside. Most people make the mistake of buying based on speculation, as they only find out about these coins through their marketing hype, and end up buying at inflated prices. Instead, it is usually best to buy based on value, and hold for longer periods of time as the product develops and matures. This requires deeper market research than reading trending tweets, but is worth your time since you can find the coins that will truly 10x or even 100x. Of course, it is possible to profitably buy into hype coins and jump between them, but this is a very time-consuming method that requires precise timing and can quickly end poorly. TLDR: actually do your own research, and try to buy the bottom of good coins, rather than the top of bad coins.