With undoubtedly over 22,000 coins available in the crypto market today, it’s almost inevitable that people become overwhelmed and need clarification about which undervalued crypto tokens are worth investing in. While popular digital currencies like Bitcoin and Ethereum have been around for some time — there is still a wealth of options for choosing the right coin.
Navigating the turbulent world of crypto-currencies can be intimidating due to a shortage of reliable information, with many scam coins and failed projects. However, is there any way we can grasp their potential value, comprehending the technologies/companies behind them and how they’ll perform in the times ahead? After all, prices for most cryptos stem from speculation about upcoming new advancements and massive publicity rather than balance sheets.
By December 2021, the worldwide crypto market capitalization had skyrocketed to an astonishing US$2 trillion. However, while this phenomenal rise has resulted in countless newly minted billionaires, only some were fortunate enough to capitalize on these extraordinary profits.
Don’t despair if you missed out on investing in cryptocurrencies earlier – now is the perfect time to seize this opportunity. The crypto sphere has various options for investors, and discovering undervalued cryptocurrencies with great potential can be a smart way to enter.
Investing in a potentially successful yet undervalued project is made easier with these three simple tips. They are mainly designed for pre-launch and early-stage projects but can be used to evaluate more mature ones.
1. Checking the market valuation
The first step is to check the market valuation of the project. This includes a variety of factors such as market capitalization, daily trading volume, and other metrics like web traffic, developer activity, and media coverage.
Evaluating the market is one of the easiest ways of identifying a profitable investment. It is important to remember that the higher the company valuation, the harder it can be for that particular project to have a drastic increase in its value. The price stability of the cryptocurrency is an essential measure of its value. A project with a low market capitalization and daily trading volume may indicate that it is undervalued and worth investing in.
It is also important to consider the liquidity of the project when evaluating its potential. Liquidity refers to how easily an asset can be turned into cash in order to make a profit. If a project has low liquidity, it might be difficult to sell off quickly and make a return on investment.
Before a project launches, it’s essential to evaluate its initial market capitalization. This is the value of all token units released following its token generation event (TGE). This can help you make more informed decisions on your investments.
Investing in projects with an initial market cap lower than its presumed fair value can be lucrative. The cryptocurrency’s price will typically move toward its true worth within a few days or weeks after the token generation event (TGE).
Project launches that have a lower market cap than expected possess the potential to earn more excellent value up until their fair price has been reached. Meanwhile, those with a higher market cap due to an unexpected surge of orders may decrease back down to something more reasonable.
For instance, Cardano (ADA) was initially offered at a lower price than its estimated market capitalization. As expected, it soon rose to an equivalent valuation after the TGE and has since maintained its value. Projects with a lower market cap than their actual worth at the time of issuance can be excellent investments, as they are likely to gradually reach that fair value in due course. Such tokens, therefore, present an opportunity for investors to benefit from market appreciation over the long term.
2. Scrutinize the project backers
Knowing the team behind a given cryptocurrency project is essential before investing, as it is often the primary determinant of whether or not it will be successful. In addition, the development team should have solid experience in blockchain technology and a proven track record of running a project.
The project backers should have strong relationships with industry leaders and potential partners, which indicates that they are well-connected and can leverage resources to help the project grow. It is essential to look at the team’s ability to attract new investors to secure additional funding for the project. A strong advisory board can also benefit a project, as their insight and experience can help steer development in the right direction.
After researching the team leading the project, it is essential to investigate any individual investors or companies funding it. Be sure to take note of any renowned angel investors or venture capitalist funds associated with your crypto project. One reliable figure in this field is none other than Ethereum’s co-founder Vitalik Buterin – if a project has him on board, then you know it will be worth considering.
The fact that the project has partnered with major players such as Microsoft strongly indicates its real-world uptake and practical usability. For instance, Microsoft’s utilization of Ethereum’s blockchain to fight against digital piracy demonstrates that the Ethereum blockchain is genuinely viable and worthy of investing in.
With significant companies backing crypto projects and demonstrating a genuine desire to use them in the future, your investments will undoubtedly yield substantial rewards. An active development team is essential for a successful project, with solid communication and frequent updates to their project. They should also be easily accessible and willing to answer any questions or queries. The development team is expected to look upon the ecosystem of the project, and there are factors to consider within the group such as:
- Skillset-All team members need to have the necessary skill set for the job, with no doubt in their mind that they will be able to deliver a product with quality.
- Motivation: The development team should be driven and motivated to finish the project while being open to feedback and collaboration.
- Commitment: It is important to note that the team should be committed to their project, which will reflect in their work ethic.
- Look at the potential of the technology: The most innovative projects tend to dominate the market because they can offer users something that is not available elsewhere. Therefore, analyze what sets the project apart from its competitors and how it can benefit users.
- Understand the project’s roadmap: A project’s roadmap is a timeline of when specific goals are expected to be completed and can provide a good insight into the future potential of an organization. A well-structured roadmap will have specific milestones that have been set and achieved, which shows investors that the team is dedicated to the success of the project.
Individuals should also consider the project’s legal and regulatory compliance. This is especially important if you invest in a project that has not yet launched its token or platform. Make sure to read through any documents associated with the project and research whether it complies with applicable laws or regulations in your jurisdiction.
3. Evaluate the tokenomics
Tokenomics is an essential element to consider when investing in cryptocurrency projects, as it encompasses all aspects of how a given project will be funded and grow. These include the total amount of tokens that will be created, how they are distributed, and what they can be used for. It is essential to understand the tokenomics of a project, as it could affect the price of the token in the long run.
For example, the total supply of tokens should be limited and not subject to inflation. This ensures that there is no value dilution over time and encourages investors to purchase more tokens while they are still available. The distribution of tokens also plays a role in the success of a project, as it should be fair and balanced. This can be achieved through token burning or locking tokens for a certain period to prevent them from entering the secondary market.
The utility of tokens is also important to consider when investing in cryptocurrency projects. Tokens should have a purpose behind them, such as being used to purchase goods and services, as well as providing access to exclusive features on the platform. If a token does not have any real-life utility, then it is unlikely to be successful in the long run.
For instance, PancakeSwap is a decentralized exchange (DEX) built on the Binance Smart Chain that runs on the CAKE tokens, which are used to pay gas fees and can be staked for rewards. Therefore, users of PancakeSwap have the incentive to purchase CAKE tokens in order to access additional benefits within the platform.
Last year alone, the cryptocurrency market lost around $1 Trillion Dollars during the bear markets and the downtimes. This is a reminder that investing in cryptocurrency projects should not be taken lightly, as there are many risks involved. However, with the right research and due diligence, investors can minimize their losses and maximize their gains by carefully evaluating each project before investing.
Despite the current negative sentiment and economic conditions, certain coins may be gravely underestimated due to their utility and inherent project strengths.
Finding undervalued crypto in these barren markets may be daunting, and it can be hard to tell the difference between a good or bad investment. To discern whether a cryptocurrency might have potential, research these aspects:
- Uncover the founders of the special technology that governs the crypto coin.
- Explore the marketplaces where you can trade in your desired cryptocurrency.
- Additionally, be sure to analyze the price pattern history of the crypto coin.
The crypto world is blossoming with investment possibilities, so take the time to do your research and only allocate an amount you’re comfortable losing. This way, any rewards can be well worth it.