#How do I Curate My Cryptocurrency Investing Strategy?
We are constantly bombarded by speculation and promotion of what cryptocurrency is the next path to riches. There is no shortage of big ideas in the cryptocurrency sphere. It seems like theres endless metrics by which we can measure the worth of a coin: team, use case, development, marketcap, trade analysis, and so on.
So how do we narrow it down? What are the worthwhile metrics and criteria when looking for profitable cryptocurrency investment? When we seek profitability, by what criteria can we eliminate?
These questions are why I've streamlined my curation philosophy for cryptocurrency investment. I will warn you, it is not emotionally exciting in any way more than simple greed and wealth is able to excite you. I make no optimistic judgments as to the ethics and world-changing nature of the cryptocurrencies herein, but I don't cast any emotional criticisms of them either. Its a relatively simple, logical tool to cut away the confusion, emotion and analysis paralysis of a cryptocurrency world with seemingly too many options.
A Curation Philosophy for Cryptocurrency Investing
To do this, I'm going to first divide cryptocurrencies in general into five general categories as a general lens.
Utility/platform tokens, currency tokens, pseudo passive tokens, and true passive tokens. Obviously there are coins that will fall out of this purview, ad these are rough generalities, but they'll serve their purpose just fine. The second lens is what I'm going to call value examination. Examined through this philosophy of investment, true passive tokens are easily the most sensible investment. I strongly advise you to read the entirety(its not that long) to understood the underlying framework for judgement, but if you only care about the unique properties of true passive tokens, you can skip to the end.
- So first, utility/platform tokens. Utility/platform tokens are coins that presumably offer some kind of utility on a platform. Now obviously, this can refer to all tokens, but we'll mostly talk about their relevance to a certain platform. A good example is NEO and Ethereum. The concept of smart contracts and a platform is a good one in and of itself, but it depends more on the dApps themselves. Their is little guarantee of a use case for these platforms in terms of conferring value to the owners of the tokens. There are many years to come before we see serious investment in utility/platform tokens. While utility/platform tokens are not a bad asset in a portfolio, their monetary value pales in comparison to the last category of tokens we'll be discussing.
- Next we have currency tokens. While there are certain tokens in this category that have a clear use case and with it, value, such as Monero(private and fungible currency), the rest fall short. The idea of a currency is for it to be stable and a store of value, and speculation is not that. There are likely many years before we see stability and widespread, serious, institutional use of these tokens as de facto currencies. I invest in a couple of these with extremely strong, clear use cases(Monero and Nano), but I still consider them to be leagues below my final category of investment coins.
- Third are pseudo passive coins. These are best generalized as masternode coins. While these can be profitable, it is not difficult to run calculations on the metrics and see few reach an annual ROI significantly above traditional stocks. And they must indeed be significantly above that, as the risk in buying a masternode is exponentially greater than that of traditional stocks. The vast majority of masternode tokens, as can be seen on many masternode site(such as masternodes online, masternodes pro, etc) are blatant shitcoins, functioning as pyramid schemes or outright scams whose usecase is far far secondary to the central idea of getting in, buying a node, and collecting payouts and getting out before the coin collapses. Obviously this is not a sound investment strategy.
There are several such as Phore, Smartcash, LUX, and so on that offer more stable platforms and actual teams, but even these suffer the same long-term existential question of what do they truly offer to differentiate them from their competitors? Making money as a masternode coin is not that factor in unto itself, because the money circulating is contingent on the token being utilized long-term. Lastly, they usually require some kind of effort in maintaining the node and upkeep. While these is not egregious, it is a factor in why I believe, in addition to the other elements listed above, they are inferior to the last category.
True Passive Income Coins
The final category, and the one I focus on, is true passive income coins, also known as dividend tokens. To fit this prized category, a cryptocurrency must meet these three criteria.
- Standard Dividend: these coins provide inherent use case and fundamental value: they provide you with direct payments of standard, well regarded cryptocurrencies. Notice the qualifer "standard, well regarded". Even if masternode coins fell in the true passive income category, the majority of them would not meet the standard, well regarded criteria. "Harvestcoin" or any other sub $1mill market cap coin is not a reliable dividend because the value of those tokens can, and often do, drop 90% overnight. That kind of drop is unacceptable, even in the risky world of crypto.
Coins that meet this metric are COSS, and Etheroll. COSS pays out proportionate amounts of dividends every week(soon to be every day) in accordance with the most popular cryptocurrencies being traded. While this can have its drawbacks(being paid in short-lived promo coins), it also has the advantage of paying out the COSS holder with whatever is most popular and standard, such as Bitcoin, Ethereum, and stablecoins.
Etheroll pays out quarterly in Ethereum. For the underwhelming way I refer to Ethereum earlier in this essay, it is still a powerhouse coin and industry standard.
True Passive: the holder does not have to perform any services like masternodes require. While Etheroll requires some interaction every quarter, its not a regular maintenance task like running a masternode.
Double Usecase/Permanence: Finally, these coins, as well as having the inherent value of providing a dividend, hold a primary, permanent usecase that conceptually underpins the dividends. This is seen in COSS, as an exchange, and Etheroll, in provably fair gambling. The important qualifier to this is "Permanence". This is not only seen in having a permanent usecase such as gambling or as an exchange, but the creators must be clearly pursuing long-term success and profit.
For example, this can be seen in the initial success of Coinex CET, and their lack of long-term commitment to providing holders of CET with value. They relied heavily on trendy "trade-mining", and were quick to jump to creating a new token VIAT and virtually abandoning support for CET, a strategy which has seen not only CET lose >90% of its value, but taken Coinex as an exchange from being top 20 to #111 at the time of this posting, well behind COSS. Anyone that followed the company and its lack of transparency, with sparse information on the long-term future of CET, could designate CET as not meeting criteria 3.
Another example of a lack of permanence could be seen in Kucoin. While COSS made the long-term importance of the COSS token a priority, and took pride in putting the dividend in a smart-contract so that it could not be changed, Kucoin admitted from the beginning that dividends would be reduced to 15% in the long-term, and could be changed at their behest. Further, Kucoin adopted a strategy of aggressive listing of new, trendy coins, that were soon delisted, making their dividends of little value and losing steam, taking the once industry giant to #77 at the time of this posting, behind COSS.
A final, auxiliary criteria is exponential potential. Any dividend coin worth its salt has a calculator floating out there. For example, at https://www.cosscalc.com/ I can see for myself that if COSS exchange volume went up to 50 million, which would take the exchange up to a humble #45 on CMC(only roughly 25 spots up) I could be making $500 a month in passive income by holding just $2000 worth of COSS tokens. The math speaks for itself. Exponential potential should require no hyperbolic statements, no grand visions of a futuristic society dependent on cryptocurrency. It should speak for itself with a simple, mathematically sound, realistic future. In the case of COSS, its that an exchange that has survived the bear market and has actually gained volume steadily, overtaken competitors and added features is certainly capable of reaching $50 million in exchange volume in the cryptocurrency market and providing the holder with high quality passive income.
The True Passive Income coin offers something no utility/platform or currency coin can: not the promise of being able to dump a bunch of digital tokens at a high price and take the money and run, but an opportunity to provide yourself with that money in a constant stream. That is why true passive income coins are inherently superior as an investment. If and when COSS or Etheroll achieve success and high price, there will be no desire to sell those coins for a giant jackpot(although obviously you could). This philosophy of investment offers everything utility/currency/platform tokens can, but exponentially more.
That is my curation philosophy of cryptocurrency investment. Its simple, unemotional, and easily applied. I spend some time criticizing other coins, and I hope it doesn't offend anybody, but I stand by my criticisms. I hope its of some help to you. If you find it compelling, please feel free to use my referral link for COSS here https://www.coss.io/c/reg?r=USZQQTX1PE
P.S. I think I'll do a separate write up on Etheroll, as well as the couple currency/platform/utility tokens I invest in, since this is getting long if anyone is interested.