Opening your eyes in the morning and rushing to your mobile device to open Coinmarketcap? Your browser suggesting the URL of your token because you reloaded that page hundreds of times already… then seeing that the price has moved in the opposite direction or not moving at all… Does any of this sound familiar? If so, then then you should read this whole material very carefully as it will help you better understand the current market state and help you grow with it.
Last year was a great year for tokens, moving them from a niche interest to the hottest thing in town. During the last 12 months the top 3 currencies alone saw their market capitalization grow by over 752%, from $22.9 billion to $172.2 billion, while others have even managed to outpace this (by a lot!). 2018 is nothing like 2017 and we are now witnessing the aftermath of this bull run. According to а recent study, 46% of the coins that were launched in 2017 have already failed completely and disappeared – Swisscoin, Bitconnect, LendConnect, Branche are just few of the examples. Combine that with regulatory uncertainties and you get the current market conditions which can be nerve wracking for the more inexperienced participants.
Here are the 6 simple rules that I strictly follow that help me make smarter choices when investing. I recommend them to anyone regardless of age or experience as they sum-up some of the hardest lessons I’ve learned over my experience.
Having the right mindset is key…
Rule #1 – Have the Right Mindset
There is an old saying on Wall Street that goes: “Bulls make money, bears make money, pigs get slaughtered!”. It literally means that it all comes down to having the right mindset.
The bad news is that if you are impatient, greedy, only looking for quick profits and not having a plan on how to execute in different market scenarios, your money will most certainly go into the pockets of the more patient players that have a basic plan. This state of mind will make you more vulnerable to the hype machine surrounding every coin and could potentially trigger a “fear of missing out” / FOMO investing state where you will literally “buy high, sell low” simply because others are doing it. This is not the way to do it.
Here is an illustration of what FOMO driven investing looks like
The good news is that you can fix that relatively easy if you are willing to improve and you pay attention.
Before I even consider looking into a project, I always ask myself these three questions:
1. How high is the market right now?
To make profits you need to buy low and sell high and most importantly be aware of market conditions in order to be prepared for all possible scenarios. If markets are at an all time record high, and you are determined to buy, make sure you buy small chunks at different times and you target assets that are likely to withstand the test of time in case of a correction, because only through time, they could recover your losses. If the market is relatively low (like it currently is), then that generally is a great opportunity to buy as long as you don’t put all of your money on a single trade. Always break down your investment into several entries and leave some reserves for you to be able to buy some more in case price drops further.
2. How much can I wait in case things go bad?
When investing in the coin market (and unless you buy complete crap like bitconnect or other ponzi schemes), time is generally your ally. Here is a historical chart of the 120 years+ course of development of the Dow Jones Industrial trend.
Notice how that chart makes things much easier to understand. Markets are bullish in the long run. You can also spot the overbought/oversold cycles more easily. You don’t need mumbo-jumbo experts to provide you with in-depth analysis for you to comprehend this. Even a 10 year old has the common sense to know that in a few years the global population is likely to have increased significantly. More people means more consumers and a bigger economy. Technology advancement further leverages this.
Conversely, if you zoom in on that same chart, and focus e.g. on a 3 month period, it will be much easier to get lost and make an irrational decision out of panic. Here is a real-time example of that same Dow Jones Index for the year-to-date period:
This is why you need to take advantage of time when it comes to token investing. The good news about tokens is that due to their extremely high liquidity, the time factor is accelerated when compared to other class instruments (e.g. stocks, bonds, futures etc). This means that overbought/oversold cycles happen faster (and with stronger volatility) and the ones who have the mental fortitude to withstand them have higher odds of winning. If you over-leverage yourself (use margin trading) and are pressured to sell, you are likely to sell at the wrong time and lose all your hard-earned cash. It is important to have a backup plan and be prepared to “zoom out” in case things go bad, it’s part of the game and it’s the best way to preserve your wealth. If you can increase/rebalance your investment during an oversold state, then that is the best way to do it.
In order to have the proper mindset, I always remind myself of the previous overbought cycle and the correction that followed…
The people that managed to “zoom out” and took advantage of the oversold cycle that followed Jan 2014 made their fortune after that. The weak, the panicky, the over-leveraged were shaken out and they missed the gains. 3 Years waiting might seem like a lot considering the bull run that took place last year, but patience is the most essential part of the game and history has proven that countless times. This mindset makes me better prepared for a “worst case scenario”. I don’t invest more than what I can afford to wait for 3 years+ and I always keep some resource so I can buy in case of additional market meltdown.
3. Am I buying because others say the price will go up or am I buying because I believe the project will be successful?
Of course, we are all in this to make money. However, if you tunnel vision on a coin’s current price, you lose sight of what actually causes it to change. My rules will be useless if the only due diligence employed is “Are others investing in it?”. Be critical of the project and the product it develops – let’s face it, most token projects out there are crap and are mere pipe-dreams of their idealists founders whose arguments can often be summed up by “Centralized is bad!”. This couldn’t be any further away from the truth.
Permit me the use of an analogy: after the 2000 dot com bubble, the companies that recovered and made astonishing returns for their investors were Amazon, Microsoft, PayPal, Ebay – all companies with products people needed and loved using; they didn’t recover because people were investing in their name, they recovered because their products had consumer approval. I like to invest in products that I would love to personally use or that I feel a lot of people would love to use on a day-to-day basis. This is a great mindset to have.
Rule #2 – Look for projects with an actual, real product and a clear road map
If 2017 was the year of concept and whitepapers, 2018 is all about live products and adoption.
Make sure there is a real product already available to the users. Unlike promises which are just words, a real, working product validates the value of the service. Of course, this also means the product actually has to have value. At this stage the world does not need more whitepapers, it needs validation.
Ask plenty of questions: Would I use it on a day-to-day basis? Does it beat the current centralized equivalents? Most coin projects fail this test as they rarely question how their product can compete with already existing or future centralized applications. Many also fail to provide a product that has actual retail value even though they might have the technology in place due to third-party dependency and lack of adoption.
In addition, a poorly written road map is almost always an early sign of imminent failure. Examples include vague goals, big gaps and also reframing the same step over and over to appear as if the team is doing something significant when in reality they are not.
This conveniently brings us to our third rule, intended to save you from becoming prey to sweet talkers with no substance.
Rule #3 – Find out if the founders have been successful with anything else
The easiest way for you to spot weak teams is to analyze their members’ previous history. Is this their first serious project? If so, then the likelihood of failure is pretty much 100%. Get rid of them. You want to trust people who understand business development, have business ethics, and possess a proven record of success.
Look at this that way – if you can choose between trusting experts or trusting rookies, why would you ever choose the rookies? No matter how much money you throw at their project, it will not improve their business skills. Another benefit of a proven record is trust – you will know that these guys are unlikely to do stupid or illegal stuff since they need to maintain their credibility. Remember Tezos, Centra and ATB? All of these faced lawsuits which completely destroyed their credibility. Tezos for example did a series of illegal transactions with tokens that were intended only for development use. That’s what happens when a bunch of morons raise $232 million for a worthless company. In other words – look for people who have a lot to lose from betraying your trust.
Pick the experts and you will be increasing your odds of success dramatically. Remember – a company is nothing but the people behind the product. However, while this rule is super important, there is something else which should turn you off a project even faster than a shady team…
Rule #4 – Only choose projects with very low reliance on third parties
Can you imagine putting money in a software developer who has a great technology but zero applications likely to adopt and start using that technology? This happens surprisingly often in the virtual coin world as adoption is limited and is subject to fierce competition – something rarely explained in all the one-pagers out there. In addition, there are projects which can only succeed if other companies take the risk to integrate their service within their business model.
Personally, I would not count on that happening consistently. Projects that develop only a “protocol” or an “engine” without a guaranteed retail application are also to be dealt with carefully. An enterprise being completely dependent on third parties which are beyond their control is a recipe for disaster and I would always stay away from it. Look for projects which own their infrastructure and can output a retail product for you to evaluate regardless of third parties. Anything else is pure risk.
Rule #5 – Ensure the coin market cap is low and token supply is limited
Аlways look for projects with a tight supply and low market cap. I never touch tokens which have a large caps because my opinion is that is a sign the moment has been missed out. In addition, there are a lot of projects which do not destroy unsold units after the original sale which means that the supply will not adequately correspond to market demand. Asset price will mostly rise if demand is bigger than supply. When you have an endless supply and not that great of a demand, you have a recipe for disaster.
On the other hand, if the asset supply is highly limited and the company promises there won’t be any future offerings, you will have protection against oversupply and with these conditions the price may go up as high as 5x-10x within 12 months. You want the coin to be accessible but precious. Speaking of accessibility…
Rule #6 – If it’s not already listed on two exchanges – forget it
Not being listed on an exchange could mean a lot of things, most of which are pretty bad. Maybe all exchanges in the world are rejecting this coin or maybe the team isn’t making the effort to get listed – it doesn’t really matter. I stay away from tokens which aren’t listed on at least two exchanges. On the other hand, you shouldn’t become an absolutist and only purchase those which are on the largest exchanges. This is definitely a mistake. If you want to diminish your risk and increase your odds of success you need a competitive advantage. This advantage I like to call “underpriced attention”. In my opinion some of the greatest opportunities are available on the smaller exchanges so don’t be silly, pay attention where the rest aren’t, and even more importantly – WHEN.
Finally, I know this sounds like obvious advice but it has to be said…
Do not sell too early. Set a target..it can be a target in time, or a target in price and stick with it. Both options are better than just spontaneous emotion selling. Being a weak hand will not let you realize your full potential as an investor.
Are there companies that match all of the above criteria?
The answer is – yes.
After doing detailed analysis on 100+ tokens, I made my 2018 list with the best picks at the moment. Ready?
My Top 3 Tokens to Invest In July 2018 are the followingm
These 3 companies have real valuable products, founders that are already successful, long term potential, great token economics, and most importantly – undervalued market capitalizations which have further been discounted from the current oversold market cycle condition.
1. LockTrip (LOC)
Rating: (4.7 of 5)
After studying more than 100 projects, I can say that the best pick at the moment is called “LockTrip” (their site – https://locktrip.com ). They fit all of my value criteria and seem like a project that can make it in that 1% success stories in the short and long term.
LockTrip completely removes all commissions in the travel industry and adds this value to the customers because they directly provide the same service like Booking.com and Airbnb but at 0% commission. As a comparison, Booking.com charges 15-35% and Airbnb charges 18% which ends up in 20-30%+ higher prices for travelers.
They already have a live booking marketplace (https://alpha.locktrip.com/) where you can book among 100,000+ hotels worldwide with the LOC token. In a recent material, their team compared 800 hotels in 45 cities in 3 continents with the same hotels listed on Booking.com and Agoda.com, and have proven that their prices are 20% cheaper. You can check their post here.
This creates an immediate and unique application of the token and beats 99% of the projects out there. A token with real fundamental value, worth buying for the purpose of cheapening your next travel and not for just pure speculation like the majority out there, sounds weird doesn’t it? That’s because most other tokens don’t have any real world application.
The company completed its launch in November and has sold approximately $6 Million worth of LOC tokens to a vast community of travel lovers and end users. They are not hype driven and have a 100% organic community.
Their total token supply is extremely limited – a total of 18.5 Million LOC, and there will be no emmissions in the future. Considering the current market conditions, I believe that LockTrip can reach a significant growth over the next 6-9 months.
The LOC token price is around $1 at the time of writing the list and is down 300% from the Jan 2018 peak for absolutely no reason which is a great discount. Their market cap is less than $10M which is completely undervalued. My price prediction for LOC is for $10 within a 6-9 months range (that’s more than 1000% growth). Depending on the number of bookings that they process through their marketplace, this can increase up to $20 or more because of the limited token supply and also because every booking results in LOC tokens locked into bookings escrow/smart contracts for the duration of the travel, that further cuts the limited token supply and hence – more bookings = less tokens.
Final Verdict: I strongly recommend to look into their project as it really stands out from all the hype driven trash that we see every day. Check out the project at https://locktrip.com
- Real working product that has been proven to make global travel cheaper – they have 100,000 hotels which you can book as of this moment
- 20% lower prices when compared to Booking.com, Agoda.com and Airbnb – simple as that
- Best Road-Map I’ve seen – live product with retail user focus.
- Very Low dependency on third parties – they have already launched their own retail application with a working product
- Completely organic community. You will find real discussion going on in their telegram from industry professionals and travel lovers
2. Request Network (REQ)
Rating: (3.7 of 5)
Request is a decentralized network that allows people to request an invoice (a payment) for which the recipient can proceed to making a payment in a safe and secure way. The fact that a decentralized authentic ledger stores all of the information makes payments not only more secure but also easier and cheaper. Plus, it allows for a broad array of automation possibilities. Note: Again, there’s a working prototype.
The transparent and regular updates (not something commonly found in the coin sphere) and the fact that the masterminds behind Request have an impressive background and previous experiences (they have created a money transfer company called Moneytis) – backed by one of the largest accelerators in Silicon Valley (Y Combinator) – have made Request gain a lot of credibility.
Note: Request is more than just another payment processing method. There are added benefits to using the tokens, including the cross-currency transactions (you get to pay in the currency of your likes and the recipient received the currency they wish), identity protection, automated invoicing, and cheap (and fast) value exchange. Notice how there’s actual value in the product.
- Working prototype
- Experienced team
- Strong competition from OmiseGo, Pillar and more
- A somewhat “me too” company
3. Cool Cousin (CUZ)
Rating: (3.5 of 5)
Cool Cousin is a travel app. The idea behind its creation is to enhance the efficiency of the services offered in the travel industry and create a global community of local experts (called Cool Cousins), whom travelers may refer to for treasured and in-depth travel information about the place they are planning to visit. As a result, the overall travel experience is enhanced with travelers being provided with unbiased and relevant details about the desired destination. From cheap tickets to a football match to a great pool bar in town, travelers may ask Cool Cousins anything.
The app is used by more than 500,000 travelers and 1,000 Cool Cousins already, who use a tokenised, P2P (peer-to-peer) system of communication and a smart contract-based platform that is built on the EVM, which ensures the transparency and security of information.
The CUZ token is the company’s means to incentivize the Cousins’ community and add an extra layer of functionality to the ecosystem. Travelers may use the CUZ coin to get access to a broad array of services (i.e. booking Airbnb space) while Cousins can monetize their CUZ tokens to receive rewards and bonuses, and accept payments from the people they help with their travel tips.
- Allows for better use of money and time when traveling with personalized guidance from like-minded locals
- Working application
- Reasonable hard cap
- No high-valued token names in the team.