In this article I’m going to talk about different categories of cryptocurrencies that I figured out for myself, and currently use it to define my strategy in trading and long-term investments. The crypto market has been really crazy for last several months, with lots of volatility, hype and speculation. Every day, more and more people get involved, also big companies and even some countries are experimenting with digital currencies or blockchain technology in general.
But it’s important to remember that the market is still very immature and unpredictable. So, risk of suddenly losing all your money is quite high, especially when it comes to less-known and over-hyped cryptocurrencies.
To distinguish worthless and potentially valuable coins, sorting them into several groups might be a good idea. In that way, you can simultaneously cut out undesirable currencies and focus only on a a group that interests you, so there is more time to do specialized research on each project and avoid information overload. This could be especially useful for Long –term holders, as they seek for future growth potential.
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First category consists of worthless coins or shitcoins no matter what you call them. Currently lots of coins fall into this category. These are joke coins with stupid names, scams, non-blockchain based ones and so on. In most cases, it’s very easy to detect worthless shitcoins – they have uninformative websites or no websites at all, a small market cap , very few active wallets and small trading volume. Those coins usually have only one or two significant jumps in price, traditional pump-and dump schemes, that are caused by speculation only . The rest of the time, coin prices usually remain close to zero. Those shit currencies are extremely risky even for day-traders because they can instantly crash and never recover. And of course, people who seek for long-term profits better stay away from such coins.
Second type of a digital currency could be called an unremarkable coin. These ones are unlikely to be scams and from first sight, offer pretty promising features . But if you dig deeper, you won’t find any exceptional qualities. Those coins don’t add any additional value to the market as pretty much everything they offer, can be done with established cryptocurrencies as well. Because of that, I’m very skeptical of bright future for these unremarkable coins. Anyway, speculators seem to like those coins as they are just good enough to be hyped easily. These currencies are still very risky for long- term holders who want to invest in projects that will stay in the game for a long time. Well, quite a lot of people like the strategy of buying lots of different unremarkable coins with small amounts of money, in hope that at least one of them hits record-high price. But if it happens, the price won’t stay around for long unless people actually start using it for real transactions. From my point of view, this is highly unlikely. So, most owners of the currency will try to exchange it to more promising cryptos or even fiat money. I think in the long run, most unremarkable coins will crush.
Next group consists of potentially great cryptocurrencies with good value proposition, solid team of developers and at least some unique features. It’s much harder to find such coins among recently created currencies compared to already established coins, such as dash. Currently, there are very few Coins that are meant primarily for payments, but still manage to stand out from the crowd. They are quite attractive for day-traders. Long-term investors should be careful , because these currencies are still risky. On the other hand, investing a relatively small amount of money is definitely not a bad idea.
Forth category combines promising and useless projects based on blockchain technology. They use their own tokens as form of payment and are built on established platforms, mostly ethereum. Golem is a good example of a promising application , as it seems to have great potential. On the other hand , we can see lots of scam and useless projects are trying to get money through ICOs, that are now super trendy. Most of them fail within a month. Be extremely careful when investing in decentralized apps. Even If the idea itself is very good, it may be just too early. Mainstream adoption is not as near as it may seem.
Last and most exiting group unites platforms that can be used in lots of ways apart from just digital form of payment. Smart contracts and decentralized apps – this technology has enormous potential and will definitely have a big impact on our lives. At this moment, Ethereum , Lisk and Neo (formerly known as antshares), are platforms that could start blockchain adoption. Of course, ethereum is the safest choice for long-term holders.
I also think that bitcoin , despite its problems, is the safest investment and is almost guaranteed to survive through hard times. It still stands apart from altcoins in some terms.