New cryptocurrencies pop up on an almost daily basis nowadays, and there are already thousands of them out there. However you may have noticed that the vast majority of those cryptocurrencies don’t really go very far, and many stagnate or even depreciate after a couple of years.
Predicting how a new cryptocurrency will pan out is not easy, and is almost impossible. However, there are ways that you can evaluate its potential and determine whether or not it has a good shot at making an impact:
- Utility
For any cryptocurrency to make its mark, it needs to have some form of utility that is preferably unique in some way. In other words, it actually needs to be able to solve a problem or improve on the way things are currently done.
If a cryptocurrency does not have any utility, there won’t be any reason for people to want to invest in it. It won’t stand out in any way, so why would anyone choose it as opposed to more established cryptocurrencies that have less risk?
- Team
Every cryptocurrency is only as strong as the team behind it – especially when it is starting out. If you want to know its potential, you need to research the team and find out who they are, what they’ve worked on in the past, and how successful their projects have been.
Keep in mind that there are many fake cryptocurrencies that may list prominent individuals and well-known experts in a bid to lure people in. To ensure you don’t fall victim, your research must be thorough.
- Scarcity
The scarcity of cryptocurrency varies depending on its code and how it is set up. In some cases, it may become more difficult to produce the coin as time goes by too.
Because of the principle of supply and demand, scarcity is important to the future potential of any cryptocurrency. The more limited the supply, the more confident you can be that its value will increase if there is sufficient demand.
- Adoption strategy
Just because a new cryptocurrency has good utility, it doesn’t necessarily mean that people will flock to it automatically. Instead, the team behind it needs to have a strong adoption strategy that will market the cryptocurrency.
Most new projects are open about their adoption strategy and include it as part of their road map. It is up to you to look into the strategy and decide whether or not it is a viable plan that can live up to expectations.
- Perceived value
Although perceived value may seem ephemeral, it can actually be a tangible factor in the potential of a cryptocurrency. The more positive indicators are present, the greater the perceived value of the cryptocurrency will be – and the more demand there will be for it.
To determine the overall perceived value of a cryptocurrency, you will need to look at any and all factors associated with its development. That includes any milestones it has already achieved, key collaborations or partnerships, media coverage, and so on. Exchange listings also contributes towards the perceived value, as any cryptocurrency that is listed on top exchanges could be deemed more trustworthy than those on tier-2, tier-3 or obscure platforms.
If a cryptocurrency is legitimate and would want to focus on a certain geography, say Canada they will be willing to go through the review and due diligence process of reputed exchanges to be listed on them. In this case, their top picks for Canada would be the likes of Bitbuy, NDAX.io, Coinberry etc.
Evaluating the potential of new cryptocurrencies is essential if you don’t just want to trade bitcoin but would like to explore other ICOs and opportunities. It will require quite a bit of time and effort on your part however, and you need to carefully go over the information that is available.
Always remember that there are no guarantees that a cryptocurrency will ultimately live up to its potential. That being said, if you do carefully evaluate the potential it has you will be able to make far better decisions on the whole.
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