Introduction to the Monthly Altcoin Pick Methodology
Each month we analyze the cryptocurrency marketplace for the next successful cryptocurrency project. As part of our examination, we review at least ten different cryptocurrency projects we believe are well positioned to perform well in both the short-term and medium to long-term and select the best candidate based on our methodology (see below).
Overview of Our Methodology
The monthly Altcoin section process begins with analyzing the multitude of sectors and niche markets within the cryptocurrency market and focusing on sectors of the market that are in high growth. We also take into account popular and emerging crypto narratives, especially when they are related to the sector being researched.
Within a high-growth sector, we then examine the potential candidates within the sector to determine the project(s) with the greatest potential for long-term growth for that market sector.
Then we proceed to examine shorter-term factors and indicators such as:
- Industry momentum & market trends
- Upcoming technological developments or improvements
- Upcoming partnerships and or launches
- Upcoming exchange listing(s) as well as current liquidity
The top candidates selected are then shortlisted down to only a handful. The remaining few projects are then scored based on our Framework for evaluating cryptocurrency projects (see below) until we are able to narrow the successful candidates down to the top three.
The top-scoring project then becomes the Altcoin Pick for that month.
Framework for evaluating crypto projects
Utilizing a standardized methodology and approach is key to being able to identify cryptocurrency projects with the potential for future success.
As part of this methodology, projects are evaluated based on seven key factors:
- Market Opportunity & Growth Potential
- Technology Utilized
- Ecosystem Development
- Executive Team & Core Developers
- Roadmap Progress
- Token Economics
- Token Performance
1. Use Care & Market Opportunity
The potential for mass or worldwide adoption and the market for future growth is determined. There are a number of factors and questions asked at this stage.
- The primary use case and challenges to adoption?
- Competition, market demand growth potential (domestic/international)?
- Is the project an industry leader (or the existence of market leaders)?
- What is the competitive advantage(s) of the project?
- Market competition (both within and outside the blockchain)
2. Technology Utilized
The technology utilized is a significant factor when determining the long-term success of a project. When assessing the technology, we assess the functionality of the technology and a comparison of competing projects. The evaluation includes the assessment of:
- Development activity & pace of development (GitHub activity)
- Technology framework and structure (consensus mechanism and processing speed)
- Market relevance of the tech employed
3. Ecosystem Development
Blockchain ecosystems are a core factor when determining the current and future potential success of a project. The larger the ecosystem and connectivity between other projects and initiatives, the greater the chance of success.
An ideal project will have a strong community of developers and potential customers, and proven partnerships to help leverage its growth. We also look at network transactions such as active addresses, on-chain transactions, and the number of existing dApps.
Some of the factors we look at include but are not limited to:
- Social media following
- Network analysis (on-chain transactions)
- Community size and quality of community engagement
4. Executive Team & Core Developers
The core team takes into account the executive management team and the core developers working on the project. Team competency and capability are determined by an analysis of their credentials and past successes on related projects.
Factors taken into account include but are not limited to:
- Executive team credentials
- Core Developer team credentials
- Overall size and balance of the team
- Changes to lead personnel and potential risks
5. Roadmap Progress
The ability of the team to make and achieve their development goals is key to the future success of the project. Success in meeting their roadmap goals is an important metric to determine whether the team is able to deliver on their current and future promises.
The timely delivery of milestones and the ability to commit to the delivery schedule is a critical metrics of the commitment and ability of the team.
The evaluation includes but is not limited to:
- Analysis of the Roadmap
- Delivery of milestones
- Project announcements
- Communication of the team pertaining to current and future deliverables.
- Future milestones and the likelihood of attainment
6. Token Economics
The examination of token economics begins with a comparative analysis of the project market cap with respect to its relative position to other projects. The analysis also includes evaluating the role of the token, potential drivers of demand, and other factors that may lead to appreciation in value over time. Assessment of the token economics primarily incorporates variables such as:
- market cap of the project
- role of token and demand potential
- drivers of value
- relevant news
- incentive mechanisms
7. Token Performance
Here we consider price volatility risks associated with the underlying asset. Token performance is weighted slightly lower than the other fundamentals because of the more transient and dynamic nature of price movement, volume, and liquidity.
We look at the price and volume performance trends of the tokens in the context of the overall market, as well as, individual project dynamics. It is important to note that while volatility reflects risk, it is not necessarily an accurate indicator of the commercial viability of the project or the long-term value of the token. Liquidity risks associated with the underlying asset. The ideal project will have an asset with positive long, medium and short-term price momentum, in addition to strong, steady volume on major exchanges with a low level of vulnerability to price swings.
The evaluation includes but is not limited to:
- trading data analysis
- relevant news
- token economics
- social media
- value modeling
These abovementioned factors are analyzed both individually and also within the context of the project as a whole. Each factor is individually scored and weighted to derive a numerical score for each project. A numerical score is assigned a specific grade and the project with the highest grade is selected. A full report is provided for members.
The Altcoin evaluation report
The Altcoin Report
Each month the team at Altcoin Investor releases an Altcoin Pick of the Month. Members are notified by email of the Monthly Altcoin Pick and are able to access a report that includes the results of our evaluation used to reach our conclusion.
The Altcoin Pick of the month report provides readers with a comprehensive analysis of the project based on our evaluation methodology (see above) and a final conclusion from the assessment.
It is important to note, as a research company, we are focused on assessing the long-term value and associated risks of a cryptocurrency project. Please note, the Altcoin Pick of the Month is not a short-term buy/sell indicator.
This is only our opinion and we rely on the information publically made available by the project, the project team members as well as third-party sites as well as our own research.
The details of the evaluation report include a project summary, project introduction, presentation, and analysis of seven key project fundamentals, concluding with a grade and final verdict derived from our weighted evaluation.
All analysis and conclusions provided in our reports represent merely our opinion and any financial decisions made by you should be done with the help of your financial advisor. This is not intended to be financial advice (see our disclaimer).
Our Altcoin Reports uses a standardized methodology and approach for evaluating blockchain-based projects for identifying the current and likely future value of crypto assets. The report is the result of an exhaustive research and analysis process based on seven fundamental factors.
Based on a weighted grading of these seven project fundamentals, a letter grade is assigned to the project, concluding each report. In some cases, where it is warranted, previous reports will be updated and re-released if the conditions merit the same project being an Altcoin pick for more than one month.
The methodology employed involves both quantitative and qualitative analysis to ensure that we produce the most accurate picture possible at the time we conduct our evaluation.
As a member, you will receive notification of the Altcoin Monthly Pick by email and will be able to access all Altcoin Reports through the website.
How Cryptocurrency Projects are Graded
We use an alphabet grading structure to provide an overall grade for each of the cryptocurrencies which we analyze.
The grading ranges from the highest grade (A+) to the lowest grade (F).
An A+ is assigned to projects we believe excel in all areas and have excellent fundamentals alongside massive growth potential. On the opposite end of the spectrum, an F is assigned to projects which considered complete failures and have little to no market value.
The grades are determined by a numerical score which is weighted and summed to determine a final numerical score which is then translated into a grade.
What is an Investable Grade?
We consider any coin or token rated at B (75%) or above as investable.
The grade is determined at the time the report is published. Prior reports may be updated and republished with adjusted grades if warranted by the market.
Projects which reach the minimum threshold of a grade of B or above must have sound fundamentals. These fundamentals are determined and analyzed in each of these categories: token economics, token performance, the technology utilized, executive team (and developers), and market opportunities (growth potential).
As the fundamentals of each project can change over time, an updated report may be provided which will contain an adjusted grade that reflects our latest evaluation. This letter grade can move up, down, or remain the same according to the new assessment of the project. While it is uncommon to recommend an Altcoin more than once, if market conditions warrant it, an updated report will be generated for the project.
The project is successful with excellent short and long-term prospects.
Typically well-established and commercially viable cryptocurrency project with a solid track record and high level of token price stability.
Projects which score an A+ is typically commercially successful project with exceptional fundamentals; a thriving ecosystem and large-scale adoption support as well as token price stability.
The token is utilized by a large community of supporters and its value is highly tied to exceptionally strong fundamentals. The governance model of the network fully reflects the aim of the project. Long-term prospects for the project appear excellent based on a demonstrable track record of sustained growth and usage.
The project has garnered early success with excellent long-term prospects.
Commercially viable project with a robust fundamental; positive ecosystem growth and widespread adoption with a high level of token price stability.
The token is utilized by a community of supporters and its value is predominantly based on actual usage of the network. Long-term prospects for the project look very positive based on the project's past track record.
The project has excellent fundamentals and early-stage adoption.
The future outlook for market adoption is excellent and the technology utilized is relevant to the market. The project has already shown signs of early-stage adoption. The project has a strong executive team, core developers, and a history of achieving its strategic objectives.
While adoption at scale has not yet occurred, it has had a strong track record of achieving its milestones. The risk associated with the attainment of future milestones is low.
While there still are factors present and mitigating factors inherent in future growth, at present the path toward full-scale adoption is considered to be low risk.
The project has excellent fundamentals but has yet to be fully implemented.
This project exhibits strong tech development, a strong leadership team and ecosystem growth in line with all milestones. However, the project has yet to prove commercial viability or gain widespread market adoption.
Project development has been consistent in moving toward the proposed governance structure of the network, though full implementation has not yet occurred. The token retains a moderate level of vulnerability to adverse market conditions.
While there still are factors present and mitigating factors inherent in future growth, at present the path toward full-scale adoption is considered to be medium risk.
The project has good fundamentals but lacks in a key area.
One major progress indicator (tech development or ecosystem growth) is typically advancing well in accordance with the roadmap but the other is lagging behind; upcoming catalysts signal a potential for a positive price trend. However, the project remains highly susceptible to adverse conditions in the market and the token price is moderately volatile.
The project has good fundamentals but lacks in multiple key areas.
One major progress indicator (tech development or ecosystem growth) is typically advancing well in accordance with the roadmap but the other is lagging behind; no upcoming near-term catalysts are strong enough to signal the potential for a positive price trend.
The project still retains significant susceptibility to adverse conditions in the market and the token price is moderately volatile. Examples may include a technologically sound project with little prospect of adoption due to a shortage of marketing resources OR a popular token behind on tech development because there aren’t enough devs or projects in the ecosystem.
The token value is based primarily on speculation and network transactions medium. There is the potential for high price volatility.
The project is considered stalled with a slim chance of advancement.
The project has delivered on the majority of its promises and roadmap, yet it faces significant risks on many fronts. The potential risks the project could be facing may include, limited executive experience and/or lack of core developers, usability issues, critical governance issues, poor marketing, and or a limited financial budget to bring the project to fruition.
The token value is based primarily on speculation and network transactions are low. Liquidity is low and there is potential for high price volatility.
The project is considered a failure with little chance of recovery.
The project fails to deliver on promises and there is a lack of transparency and development or progress in the project. The technology is either still in development or unproven and has limited to no community support. The token price exhibits low levels of liquidity, and significant price volatility. The token price is highly is also susceptible to market sentiment (FUD & FOMO) and classic pump-and-dump schemes.
This project show signs the underlying technology is either poorly implemented or simply non-existent and a fledging ecosystem which is failing. The token price is purely based on speculation, with little to no network transactions. The token price is highly volatile and suffers from very low liquidity.
The project is considered an outright failure with no chance of recovery.
The token for all intents and purposes has no value and there are no opportunities for a turnaround or potential for any future value determination. Code development has ceased, the team has abandoned the project and the community is either minimal or non-existent. The project is considered dead with no perceived future value.
Should You Invest?
Investing Style and Approach
Our monthly Altcoin picks are best suited for investors who are interested in holding cryptocurrency investments for the longer term, which can be anywhere from a few months to more than a year. While we do take into consideration short-term potential (and gains) and expect these projects will perform well in the short term, the greatest appreciation of value is anticipated to take place over the longer term.
Altcoin Picks are Based on the Current Market Cycle
The long-term success of investing in the cryptocurrency space is being aware and cognizant of the various market cycles within this space (which historically have lasted around four years). Our monthly Altcoin Picks take into account the current market cycle. During the end of a bear market, we focus on larger-cap projects, and during bull markets, focus on smaller-cap projects with the greatest growth potential occurring during a bull market.
Pros and Cons of Investing in Cryptocurrency:
Investing in cryptocurrency can offer significant benefits, but it also comes with certain risks and challenges. Here are some of the pros and cons of investing in cryptocurrency:
- Potential for high returns: Cryptocurrencies are highly volatile and can experience significant price swings in short periods of time, which can provide opportunities for high returns.
- Diversification: Cryptocurrencies offer an alternative asset class that is not directly tied to traditional financial markets, which can help diversify an investment portfolio.
- Decentralized: Cryptocurrencies operate independently of governments and central authorities, which can make them more resistant to political or economic instability.
- High volatility: Cryptocurrencies can experience significant price swings in short periods of time, which can result in significant losses for investors.
- Security risks: Cryptocurrency exchanges and wallets are vulnerable to hacking and cyber attacks, which can result in the loss of funds.
- Regulatory uncertainty: Cryptocurrencies are subject to changing and inconsistent regulations, which can create uncertainty and instability in the market.
- Limited adoption: Cryptocurrencies are still not widely accepted as a means of payment, which limits their utility as a currency.
To determine whether someone should invest in cryptocurrency, they should consider their investment goals, risk tolerance, and financial situation. Cryptocurrency investments should be viewed as long-term investments, as short-term fluctuations can be significant.
Additionally, investors should do their own research and understand the risks associated with cryptocurrency investments. It's important to have a solid understanding of the technology behind cryptocurrency, the market conditions, and the regulatory landscape.
Investors should also consider the potential for diversification and not allocate a significant portion of their portfolio to cryptocurrency investments. It's important to maintain a well-diversified investment portfolio that includes a mix of asset classes, including stocks, bonds, and other alternative investments.
Overall, investing in cryptocurrency can offer significant potential benefits, but it also comes with significant risks and challenges. Investors should carefully consider their investment goals, risk tolerance, and financial situation before making any investment decisions.