Aside from Bitcoin and ether, nearly 15,000 cryptocurrencies are available for trading as of October 2024. Which to pick, considering your goals and risk profile? Here is a comprehensive guide to spotting promising digital assets and weeding out scams.
Why invest in crypto?
In its latest report, BlackRock calls Bitcoin a “unique diversifier” beyond traditional economic models and the risk on/off dichotomy. According to the world’s largest asset manager, modest allocations diversify portfolios without an outsized risk impact.
Bitcoin outperformed stocks and gold on many occasions. Source: BlackRock
At times, BTC appears aligned with stocks and the macro sentiment, but their correlation fluctuates, occasionally turning negative. Inherent factors explain more powerful rallies after market shocks (see chart).
Other coins — cryptocurrencies operating on native blockchains — often follow the pioneer, reacting to their own supply and demand drivers. Cryptocurrencies using non-native blockchains are known as tokens, although both terms are often used interchangeably. Tokens generally offer a broader range of uses.
Yet the absence of universally quantifiable and trustworthy criteria muddles navigation. What’s more, scams range from rug pulls to fake ICOs.
The total crypto market cap stands at $2.367 trillion at press time. This landscape is overflowing with contenders, leading to the choice paradox. With so many options available and every project promoted as the next best thing, it is crucial to gauge data and compare and contrast sources.
Where to find new crypto?
The top go-to sources include social media, data aggregators, and exchanges (centralized and decentralized). Here is a closer look at each.
Social media
Social media connects billions of people, with project founders and developers sharing news and updates. Regional preferences vary. For example, one of the fastest-moving and responding platforms in the United States is X, formerly known as Twitter.
Setting up alerts for hashtags like #newtokens will help you spot new entries. Telegram, approaching 1 billion users, is another popular messaging platform in the crypto realm.
Data aggregators
CoinMarketCap, CoinGecko, and the like accumulate and systematize information on digital assets in circulation. They rank cryptocurrencies, showing real-time prices, market capacity, and trading volume — highlights describing investor sentiment.
Crypto stats on CoinMarketCap as of October 3, 2024
Please note: exchange data may be late due to a network lag between executed trades and displayed prices. Check the prices directly on a trading platform if you need maximum accuracy.
Exchanges
Crypto exchanges list new tokens on their websites, but you may have to set up an account for full access. Centralized (CEX) platforms operate like regular businesses with formal management and KYC procedures, while their decentralized (DEX) peers are purely peer-to-peer.
Specialized websites
Trusted sources like Top ICO List and Smith +Crown also provide insights into newly launched crypto.
Investigation tools
To verify a token’s background, try entering its name or address on websites like Kryptview. The results contain multiple data points, including:
transactionscontractsholderspricesSelected analysis highlights for Shiba Inu (SHIB) on Kryptview. Source: Kryptview
Upon entering a token name or address on Token Sniffer, you get a detailed audit, including the contract code and the following:
Warning (if any). Find out if the token was flagged for involvement in a scam, bug, hack, etc.Swap analysis. Check sellability and the buy-and-sell fee.Contract analysis. Verify the contract, checking that the source is not an owner, if there are any special creator permissions, etc.Holder analysis. Find out how much of the supply the creator holds. A bubble map will show their address, alongside those of the top 100 holders and their shares.Liquidity analysis. Check if the token is liquid enough — for instance, if 95% of liquidity is locked or burned, it is glaringly insufficient. The website shows burn addresses, where tokens are sent for permanent removal from circulation.Token similarities. Check for duplicates and suspiciously similar projects.Token Sniffer results for TRUMP (an Ethereum-based token). Source: Token Sniffer
Meanwhile, BSCheck checks validity on Binance Smart Chain.
Decentralized finance (DeFi) platforms
These platforms power decentralized applications (dApps), fusing blockchain technology with programming and user interfaces for smooth transactions facilitated by native tokens.
Common use cases include peer-to-peer lending and staking. The biggest DeFi network — Ethereum — underlies numerous protocols, including:
Maker, supporting peer-to-peer crypto lendingUniswap, an exchange that uses smart contracts to create liquidity pools for trade executionAave, a protocol whose users earn interest on supplying and borrowing assets with a variable rate
NFT marketplaces
Non-fungible tokens (NFTs) are unique digital assets representing tokenized items, which means hashed information from an asset is linked and stored on a blockchain. Ownership validation through network consensus prevents duplicates.
NFTs underpin the metaverse, the general term for virtual worlds where users interact, socialize, and play via 3D avatars.
Creation of NFTs. Source: Data Science Central
Two leading NFT marketplaces are OpenSea and Rarible. Prices range from hundreds to tens of thousands of dollars.
Other NFT spaces, such as TopShot, the National Basketball Association (NBA) ‘s marketplace, are narrowly specialized. The National Football League (NFL) has produced NFT highlights of iconic moments in collaboration with Dapper Labs. Even luxury brands like Gucci and Tiffany sell exclusive NFTs.
Initial coin offerings (ICOs)
Initial coin offering — the equivalent of initial public offering (IPOs) for stocks — is a fundraising method that came to the forefront in 2018, with the bubble then bursting. Now, startups seeking capital must follow rigorous SEC guidelines, as some tokens and ICOs constitute security sales in the US.
Hance, ICOs have grown less common and highly regulated. You can find details of new offerings on sites like Top ICO List.
Alternative forms of initial offerings include IEOs (initial exchange offerings), IDOs (initial decentralzied offerings) and more. Check out EarnBIT’s ultimate guide to red flags in each 🔽
💡 Crypto scams: Learn to spot ICO, IEO, and IDO fraud
Exchange-traded funds (ETFs)
Exchange-traded funds are derivatives available on popular exchanges. They track either spot or futures prices of the underlying coins. US investors gained access to spot Bitcoin ETFs in January 2024, with spot ether ETFs debuting in July.
You may also unlock indirect exposure through crypto futures ETFs — for instance, on The Chicago Mercantile Exchange (CME). This tool debuted in in 2021.
Investors in spot ETFs purchase shares of the issuing funds that hold Bitcoin, so they do not have to own any coins, set up wallets, etc. Futures traders also profit indirectly, but the subject of each contract is the prospective price, with the obligation to buy or sell physical coins upon expiry.
Here’s our crypto ETF guide 🔽
💡 Spot Bitcoin and ether ETFs: US, Hong Kong, Australia
Tips for researching new crypto
Investment decisions must be based on thorough analysis of tokenomics, encompassing a broad array of factors, from a project’s purpose to its supply mechanics, drivers of demand, and price prospects. Check out our comprehensive guide to tokenomics here 🔽
💡 Investor’s guide to crypto tokenomics
Use cases, liquidity, and value are basic factors that can help you understand if a coin is legit or a scam like a rug pull. The latter is a fraud in which the developers pull their token off its platform after accepting payments, vanishing with the investors’ funds.
1. Use cases
Bitcoin, which emerged in 2009, was devised purely as a payment method, an alternative to fiat currencies with unprecedented privacy and transparency. When its price started climbing, traders also spotted a speculative opportunity.
Today, Bitcoin is widely regarded as an inflation hedge and store of value, even “digital gold.” When the pandemic shut down much of the global economy in 2020 and the stock market crumbled, Bitcoin withstood the pressure.
BTC’s performance throughout 2020. Source: CoinGecko
Ether, the world’s second-biggest cryptocurrency, is more than a payment method and a speculative asset. Its network supports a vast, diverse, and rapidly growing DeFi ecosystem with myriad applications. The Ethereum Virtual Machine (EVM) is at its heart, and new utility tokens emerge frequently.
Today, with almost 14,753 cryptocurrencies listed on CoinGecko, use cases are incredibly varied. The more multifaceted a token, the more likely it is to experience sustained growth. Here are a few common directions:
Money transferInternet of Things (IoT)Personal identity securityNFTsGovernmentHealthcareLogisticsMediaDigitized metalsTokenized real-world assets
Memecoins
Some tokens appear to have no inherent value apart from representing the currency of the internet — memes. They may be inspired by them directly or indirectly, and their success relies on the promise of a fun community and humor.
Most issuers clearly state that they are not meant for anything other than fun. Some memecoins develop utility and may be accepted by merchants. Those listed on exchanges are convertible to fiat currency, but convertibility does not equal utility.
2. Liquidity
The term “liquidity” refers to sufficient trading volume, meaning a token may be bought and sold without delay. Unless other investors aren’t trading in large amounts, it might not be fraudulent or not worth buying. If you find a cryptocurrency with low volume, wait to see whether it will develop any.
3. Value
A token’s current and prospective value has tangible and intangible dimensions. For example, one may purchase an NFT to support the issuer, rather than speculate on the price.
Sports tokens resemble trading cards. Song NFTs, minted by songwriters and musicians, provide specific forms of intellectual property ownership.
Here are three core components of value.
Prospects. The future price depends on competitiveness and unique features. Does the token solve a widespread problem? If it does, this solution will define its longevity.Supply and demand. Many tokens have a capped maximum supply — such as Bitcoin (21 million BTC). For others, the supply dynamics may follow an inflationary or deflationary model. Tokens may be mined, burned, and released as validator rewards. Demand hinges on market sentiment and use cases.Price and volume. Rising trading volumes and prices indicate momentum — the capacity for a price trend to sustain itself going forward. There is no guarantee it will last, but real-time data shows which assets enjoy the most investor interest for the time being.
Should you buy new cryptocurrencies before listing?
New tokens may be offered in a presale before being featured on popular exchanges. When considering such opportunities, be extra cautious, as presales may be used for scams.
Wrapping up
Navigating the crypto world is both thrilling and overwhelming, given the abundance of options and the potential for scams. Investors need a structured approach to detect promising assets while minimizing risks. Whether looking at well-established tokens or novelties, thorough research is key.
Social media, data aggregators, and exchanges, combined with in-depth investigation tools, supply valuable insights for informed decisions. Remember to assess use cases, liquidity, and value before committing, and always exercise caution.
How to find crypto to invest in: Ultimate guide was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.