Decoding the Altcoin Maze: Spotting Winners in a Sea of Tokens

By The DeFi Investor

Compiled by Tim, PANews

The crypto bull market is making waves again, not less than for now.

Which Altcoins Will Shine?

Remember the 2021 bull run? Back then, it gave the impression of every altcoin was experiencing a meteoric rise. Fast forward to today, and the landscape has shifted considerably.

With an ever-growing variety of altcoins flooding the market, picking out the true gems requires a savvy approach.

In this text, I’ll walk you thru my strategy for evaluating crypto projects and the essential criteria I take advantage of to discover potential winners.

1. Narrative Heat and User Engagement

Think in regards to the top-performing tokens over the past yr. Names like HYPE, VIRTUAL, and various memecoins might immediately spring to mind.

Do all of them boast strong fundamentals? Well, platforms like HYPE sure do, but most of the top players rely more on charisma than substance.

Source: Coingecko’s Top Crypto Gainers in 2024 article

What unites them is their massive presence on social media, where passionate fans tirelessly promote them on platforms like X.

Their success is usually tied to a compelling narrative. Consider how VIRTUAL surged alongside the AI trend or how memecoins gained traction as memes took the web by storm.

My suggestion? Keep an eye fixed on trending narratives, dig deeper into them, and concentrate on tokens with lively communities on Twitter.

2. Growth Metrics Matter

In the midst of a bull market, hype often overshadows fundamentals, but there’s a silver lining—some projects manage to capture each high attention and real market fit.

If a project has these attributes and its key metrics are booming, it could possibly be a promising investment.

Take Ethena, a stablecoin protocol, for example. Its TVL shot up by 50% in only the last month, and it’s the talk of Twitter. Unsurprisingly, Ethena’s token, ENA, climbed a whopping 154% over the past month.

Investing in early-stage projects showing consistent growth in metrics like TVL, revenue, and charges, combined with strong community interest, can yield impressive returns.

I often depend on DeFiLlama to identify the fastest-growing projects.

3. Understanding Token Economics

If you are trying to hold a token for a temporary period, token economics may not be a giant deal. But in the event you’re in it for the long haul, it’s a special story altogether.

Consider the TIA token, which nosedived over 90% in 17 months on account of heavy sell-offs by early investors after each token unlock.

That’s why understanding token economics is crucial before making a purchase order.

Token Unlock Schedule

Platforms like Tokenomist can make it easier to track the economics and unlocking history of popular tokens.

As a rule of thumb, I search for a circulating supply of not less than 30% with annual token releases capped between 20% and 35%.

If a big token unlock is on the horizon (say, over 20% of the present circulating supply), I often keep away from buying the token.

Token Utility

I at all times ask myself two questions:

Will the token I’m eyeing profit from the protocol’s success? And why would someone be willing to pay more for it than I might?

Dividend mechanisms or token buyback programs are top of my list.

While strong utility is a giant plus, it’s not mandatory. I’ve seen tokens with barely any utility perform remarkably well.

4. Embracing a Community-First Approach

Nowadays, projects that prioritize their community are more critical than ever.

Investors are increasingly turning away from ambiguous projects and are more inclined to support community-centric teams.

This is one reason why tokens like HYPE and PENGU have recently excelled.

Characteristics of a community-first crypto project include:

• Generous airdrops
• A team that consistently under-promises and over-delivers
• Active engagement on platforms like X, with the team constantly interacting with the community
• A good portion of the token supply allocated to the community

These are the first aspects I consider when selecting a token.

Another crucial aspect that might propel a token’s price is the upcoming arrival of a big catalyst that is yet to be priced in.

Potential catalysts include upcoming protocol upgrades, enhancements to the token economics model, or the launch of latest products that substantially boost project returns.

Remember, even the most effective assets may be poor investments in the event that they’re overpriced.

Patience is vital—wait for the proper opportunity, and resist the fear of missing out (FOMO) by buying into soaring prices.

Image Credit: www.panewslab.com