To many stock investors, cryptocurrencies look like a foolish gamble. Digital currencies have neither intrinsic value nor net earnings. To traditional investors, that makes them worth precisely zero.
Yet, cryptocurrencies have turned countless lucky investors into multi-millionaires.
$10,000 invested in Dogecoin in 2020 would have turned into $3.4 million within 70 weeks. The same $10,000 in SafeMoon, briefly Twitter’s top-mentioned token, would have done the same in three.
It’s hard to argue with profits, no matter how illogical or ridiculous they might seem. At the end of the day, the game rewards investors who get into coins before they rocket like Dogecoin.
So how can investors identify the next breakout crypto?
Here’s the secret: know the difference between the cryptocurrencies you’re buying.
1. Traditional Cryptocurrencies. These are the cryptocurrencies that you and I typically think about. Bitcoin, Ethereum, XRP and the other significant currencies with ambitions for real-world use. Many have professional development teams and marketers to promote adoption.
2. Moonshots. Many “Dogecoin-like” cryptocurrencies don’t even pretend to serve a purpose. Instead, they go up in price because people bid on them like Beanie Babies or collectible stamps. SafeMoon and Shiba Inu are two prime examples of currencies that have gone up primarily because of their social media popularity.
Cryptocurrencies: Risky vs. Riskier
The investor playbook is entirely different for these two types of cryptocurrencies.
Consider Bitcoin, the ultimate example of the buy-and-hold crypto. An investor who bought the world’s oldest blockchain coin in 2014 would have needed to wait three and a half years to double their money. That’s great for patient investors who don’t want to check their accounts every day.
Meanwhile, buyers who stumbled on Dogecoin in 2021 could have doubled their money in just three days. The coin would double twice again by Jan. 29, but then proceed to lose at least a fifth of its value over a half-dozen different times on a rollercoaster ride.
So, what’s the playbook for these two classes of cryptos?
Higher-Quality Cryptocurrencies:
When I look for “buy-and-hold” cryptocurrency, I follow a four-step checklist.
1. New Technology
Go to the cryptocurrency’s website and download its white paper. If there’s no copy available, avoid the cryptocurrency entirely.
If you find the white paper, spend a couple of moments reading through it at a high level. Does the currency do something meaningfully different? If it’s solving computing or scaling issues, then it’s a winner. The same is true for any cryptocurrency that’s successfully creating a proof of stake (PoS) or other low-energy alternatives to Bitcoin’s proof of work (PoW) system. It might sound complicated, but there are only a limited number of technological issues that cryptocurrencies need to solve.
Don’t bother with clones or forks of existing currencies. Bitcoin Gold, Bitcoin SV and Bitcoin Cash all made incremental improvements to Bitcoin, but all have since underperformed.
2. Strong Development Team
Read through the bios of the development team. Do these people have experience developing other high-profile currencies?
If you see names like “Vitalik Buterin, co-founder of Ethereum,” then you’re probably onto something big. Cryptocurrencies are notorious for breaking down in the real world, which means that top developers typically need extensive crypto experience. It’s rare to find a prodigy who can create a world-class cryptocurrency on their first try.
More technologically minded investors can also check the source code for plagiarism. Misspellings, copy-pasted lines and sloppy code are red flags.
3. Effective B2B Marketing
Next, take a look at the cryptocurrency’s marketing team. It’s typically an independent organization funded by a coin’s ICO.
The top “buy-and-hold” cryptocurrencies will have well-funded marketing organizations headed by an experienced digital currency or marketing specialist. You might see terms like “blockchain solutions” and “enterprise development” get thrown around; these are the people who essentially get businesses to start using a cryptocurrency. If you can’t find a marketing team, abort immediately.
4. Increasing Adoption
Finally, check the list of Coinbase’s supported currencies. If your cryptocurrency is on the list, move ahead. (You can also use the list of other major exchanges). Exchange availability is a shortcut for gauging adoption and quality. Exchanges won’t spend the time adding a new currency unless they’re confident the technology works well.
The system isn’t perfect – you’ll miss many blockbuster coin offerings. But when you’re looking to spend $1,000 or $10,000 on a single cryptocurrency, you need to stay selective in the bets you take.
7 High-Quality Cryptocurrencies
Even the highest-quality cryptocurrencies aren’t immune from falling. Much like the tech bubble of 1999 – a period where only 31 e-commerce firms of 1,500 survived – few cryptocurrencies will ultimately win in the long run.
But some do have a higher chance of becoming “the next Amazon” of cryptocurrencies. Here are seven that seem best-poised as Bitcoin/Ethereum alternatives that could rocket like Dogecoin.
Cardano (ADA). Founded by Ethereum co-founder Charles Hoskinson, Cardano has quickly gained traction thanks to its three independent teams: IOHK for development, EMURGO for B2B implementation and Cardano Foundation for legal and business development. The cryptocurrency uses Ouroboros, the world’s first proof-of-stake protocol proven at scale.
Polkadot (DOT). Much like Cardano, Polkadot was founded by an Ethereum alumni, Dr. Gavin Wood. Its development also mirrors Cardano’s; Polkadot counts Parity Technologies, Chainsafe and Soramitsu as developers. The key difference? Polkadot is only two-thirds the size of Cardano, giving it a higher upside if the firm can start moving forward with marketing.
Uniswap (UNI). The Ethereum-based decentralized finance protocol allows users to exchange between Ethereum tokens. It’s quickly become the largest DeFi token thanks to its easy-to-use interface and early adoption by Ethereum’s decentralized finance projects. Though Ethereum’s gas prices (cost of transactions) have skyrocketed to $65 in recent weeks, its shift later this year to a proof-of-stake system should bring costs back down.
Binance Chain (BNB). The native coin of Binance has emerged as a cost-effective alternative to Ethereum’s pricey ERC-20 tokens. Transacting BNB can cost 20 cents or less, depending on the size of the transaction. Though growth will likely slow down (or reverse) as the BNB token mania cools, it’s a viable medium-term investment.
Stellar (XLM). In 2014, Ripple co-founder Jed McCaleb launched the Stellar network after increasingly high-profile spats put the programmer at odds with the board. His brainchild, Stellar XLM, was an initial disaster – a Facebook XLM giveaway quickly became a hotbed of spammers and hackers. Nevertheless, the project eventually recovered in 2019 when they hired Mozilla COO Denelle Dixon to lead the firm. Today, XLM looks better positioned than ever to beat XRP at its game.
Aave (AAVE). Founded by ETHLend developer Stani Kulechov, Aave aims to help people borrow and lend cryptocurrencies. Much like rival Celsius Network, Aave can become a cross between a bank and P2P lending. Its “flash loans” also have an unexpected use: cryptocurrency arbitrage. By taking out short-term loans, currency traders can profit from minor discrepancies in price. There’s the opportunity for manipulation, but DeFi exchanges like ChainLink and others are working to patch these issues.
Internet Computer (ICP). When Andreessen Horowitz-backed startup Dfinity launched ICP in May, the new cryptocurrency instantly landed in the top-10 coins. Though its price crashed from a high of $737 to $146, the message was clear: quality cryptocurrencies will be the long-term winners. ICP can essentially run at web speed because of its scalability, making it a top contender to become “the next Ethereum.”
Moonshot Cryptocurrencies:
On the other end of the scale are moonshot cryptos, pejoratively labeled “sh*tcoins” by doubters. These coins and tokens serve no real purpose beyond enriching early investors at the expense of latecomers.
Occasionally, some of these moonshots can turn into real-world winners. Dogecoin – initially started as a joke – is now the world’s fourth-largest cryptocurrency.
But these successes are often short-lived (and that includes Dogecoin). Many of these cryptocurrencies quickly fade back to zero as enthusiasm dies down.
That means moonshot investors need to be comfortable spreading out bets across multiple currencies and taking profits early. Investors should cap initial stakes to $50 to $100.
There are also four rules for SC investors to follow. They won’t protect you 100% of the time, but they’ll certainly help in finding the next investor mania.
1. Decentralized Control
First, check the coin’s ownership using tools like BSCScan or EtherScan. You’re looking for a token with at least 500 holders and no significant “whales” in the pool. If the top-10 accounts hold more than 50% of the coins outstanding, you could be looking at a “rug pull” where developers manipulate the token to steal investor money.
Meanwhile, if the top holder is a burned wallet (identified as a “0x000….00dead” address) that holds >50% of tokens, it’s a good sign that the initial developer has handed control to the community.
2. Strong Liquidity
All coins begin with a liquidity pool funded with real money. Since scammers need to create hundreds of tokens, they will often put in the bare minimum to start a currency. I look for a liquidity pool with $50,000 or more — the more significant the pool, the more serious the developers likely are.
Avoid all coins with less than $10,000 in their liquidity pool or with few transactions. These are often scam coins looking to make a quick buck off unwitting investors.
3. Trustworthiness
Has an independent party audited the cryptocurrency code? If it’s passed external audits, it’s a reasonable stamp of approval. Community-led cryptocurrencies are also less likely to turn into scams.
As a bonus, do the developers make themselves publicly known? If the team is featured prominently on the company’s website, that’s a good sign they won’t run off with your money.
4. Marketing Quality
Do other people like the token? If the crypto has at least 20,000 non-bot Twitter followers, that’s a good sign of an up-and-coming cryptocurrency.
Also, make sure you like the coin too. All successful coins and tokens have good websites, logos and names. Attractively-named clones like Shiba Inu have a far better chance of 15 minutes of fame than cheap knockoffs, such as “SafeSafeMoon.”
To get you started, here are six low-quality cryptocurrencies that have the potential to rocket like Dogecoin.
FEGToken. The “Feed Every Gorilla” token has the elements of a “next Safemoon” token: a 56% burned wallet, an audit by Solidity Finance and branding that targets the Reddit r/WallStreetBets crowd. As of writing, the token already has 100k followers on Twitter. Though its price has swung wildly over the past several days, the coin is still up several thousand-fold since launching in February.
Bonfire. Another “Safemoon clone,” but better. Unlike SafeMoon, Bonfire’s developer supposedly transferred ownership to its burned wallet. The token also passed an audit by small outfit Dessert Finance, and purportedly has an upcoming one from more prominent audit firm CertiK.
Pig Token. Calling itself the “original black hole token,” Pig Token has already burned 57% of existing tokens. Its rising number of holders – 184,000 at the time of writing – signals the potential for more significant gains.
Solana. Developed by former Intel and Dropbox engineers, the “Ethereum Killer” looks more like a traditional cryptocurrency. Its lower market capitalization, however, means that the coin has a strong potential for gains ahead.
Hanzo Inu and Kishu Inu. Of the Dogecoin “Inu” clones – Shiba, Akita, Hokkaidu, Alaska and CoShi – Hanzo and Kishu are two of the few that meet the holding requirements. For Hanzo, developers burned 60% of coins. The top-10 accounts hold less than 15% of the total cryptocurrency. Meanwhile, 95% of Kishu coins have already been burned. Though neither might eclipse their Dogecoin predecessor, both still have the potential to create smaller gains.
Plenty of moonshot tokens get created every day. Many will fizzle, but those that succeed can turn $50 investments into $5,000 or more. It’s a matter of finding them before they break out.
