Over the past decade, crypto trading has become an increasingly popular investing opportunity and many ponder how to predict crypto’s future. When looking among over 10,000 coins Bitcoin and Ethereum are obvious choices, however, for those looking for higher returns there are some guidelines on how to spot the next big coin.
What the Next Big Coin Does and How It Stacks
The legality of Bitcoins in the UK and many other countries has made trading cryptocurrencies accessible to most. This opportunity has brought about many uninformed investors looking for tips on how to spot a promising crypto.
Firstly, you should start off by acknowledging what the coin does and how it stacks against the competition regardless of the project’s position on CoinMarketCap.
The following technical aspects are crucial to look at:
- Consensus mechanism – Whether it is Proof of Work (PoW), Proof of Stake (PoS) or any of the less frequent consensus protocols.
- Scalability trilemma – How the omnipresent trilemma was resolved on the blockchain and which aspect had been compensated on.
- Number of transactions per second (TPS)
- Time to finality (TTF)
- Transaction fee
If you are wondering how to know what crypto to buy, keep in mind that cryptocurrency’s potential can also be evaluated by looking at developer activity on the blockchain. Developer activity is expected to be in direct correlation with blockchain improvements and feature implementations. Platforms, such as CryptoMiso and Santiment rank crypto projects based on the number of GitHub pushes and investors can easily reference them in their search for the next big coin.
How to Know Which Cryptocurrency to Buy by Who is Behind It
While on the ‘how to find the next big crypto’ quest, it is very important to look up the crypto founders’ credentials or the history of their previous collaborations as positive affiliations may be indicative of their own project’s success. For example, if one was to investigate Polkadot or Cardano, they would find out that their founders Gavin Wood and Charles Hoskinson respectively were also co-founders of Ethereum.
Contrary, if the founder has a history of involvement in shady or “pump-and-dump” schemes it would be wise to avoid the project altogether. If there isn’t any significant information on the project’s founder/CEO readily available, it is a good idea to look for a few interviews with them as this may be another good indicator of the project’s credibility.
How to Know Which Cryptocurrency Will go Up Using Tokenomics
When wondering which cryptocurrency has the brightest future, the next crucial aspect to look at is crypto’s tokenomics i.e. coin supply sources vs. demand drivers. Simply put, when the demand outweighs the supply the price goes up.
On the supply end things to evaluate are:
- Annual inflation – When too many coins are minted/mined annually it will be hard for the coin to hold its value without any type of coin burn mechanism in place.
- Initial allocation – If a substantial share of the initial supply was allocated internally to the team and project’s partners, the rise of coin price could prompt sell pressure from these parties thus driving the price down. This is not necessarily a deal breaker as in the case of Solana, however, when it comes to lower cap projects it is better to look among those whose token allocation is more diversified among its community.
- Vesting schedule – A preferred vesting schedule is long and smooth, as such will not have much impact on the coin’s price. A short and staggered vesting schedule will likely result in price dips at the end of each coin lockup period. However, if you ever wondered what is the best time to buy cryptocurrency, these types of price dips are ideal buying opportunities.
The demand for a coin is primarily a result of transaction fees and staking rewards.
- Every transaction on the blockchain requires a transaction fee to be paid to the miners/validators. Therefore, a greater user adoption and activity on the blockchain will increase the demand for the coin, thus driving its price up. The best way to determine or forecast the chain activity is by looking at the project’s ecosystem, its partnerships and growth rate.
- High staking rewards on blockchains with PoS consensus mechanism will incentivise the investors to lockup their coins for prolonged periods of time consequently lowering the number of coins available on the exchanges. Coin drainage from the exchanges can result in a supply shock and a price pump.
Using Price Predictions to spot Cryptocurrency that will Boom
When researching what is the next cryptocurrency to boom, perhaps the most important aspect to look at is the chain’s price prediction. The best way to go about this is to look at the few predictions and take an average of them as some may be more bullish than others. Being aware of these predictions can help one time their exit strategies.
Looking for the Next Big Crypto Among Small Caps
When looking for the next big coin among cryptos beyond the top one hundred, there are additional steps an investor should take at the very beginning of the research.
Firstly, one should head off to CoinMarketCap or CoinGecko and look at the coin’s trading volume, current and historical as well as its availability on the exchanges. Low market activity is a bad sign and drastic decrease in trading volume over time is a clear red flag for any investor.
It is preferred that the coin is listed on at least one reputable exchange such as Coinbase, Binance, FTX and the trading volume on this exchange should be substantial. Even though coin’s availability exclusively on decentralized exchanges (DEXs), such as Uniswap, may not necessarily be a deal breaker, it is important to keep in mind that DEXs do not have specific requirements or project listing criteria. In such cases, it may be a good idea to look through the project’s whitepaper for investors associated with any larger centralized exchanges. Such associations could potentially lead to the coin’s listing on the exchange in question.
The latest version of a project’s whitepaper is typically found on its website. If not, a large database of crypto whitepapers is available on whitepaper.io. Whitepapers are a great source of project information such as who is behind it, the objective, whether it is a fork of an existing project, the roadmap, partnerships and sources.
- If none of the founders are the author of the whitepaper, it would be wise to proceed with caution.
- Reference to Bitcoin in the introduction as well as emphasis on competing or similar cryptos when explaining the project’s objective are also a bad sign as it is likely aiming to lure inexperienced investors.
- Solid projects are built from the ground up as this requires dedication and an engineering team, while forks can be made by anyone with moderate knowledge of coding.
- The roadmap should list realistic goals over the course of the next few years. It should include things like: test net, main net, exchange listing and performance upgrades. Skipped or constantly postponed roadmap goals are not a sign of the next crypto to boom.
- Though it might seem trivial, it is a good idea to look at the sources and references at the end of the paper. Absence of references is not a good thing, while citations of general sites like Wiki or other whitepapers means that the author is just trying to fill up the space. Credible sources are publicly published research papers and early niche texts.
Spotting the next big coin requires a lot of research or a tremendous amount of luck, which is something to keep in mind when encountering a story about a friend of a friend who’s made millions on a meme coin. Only through a thorough research can you ensure that the next crypto boom does not leave your coin behind