The realm of cryptocurrency stands as a unique domain, presenting investors with abundant prospects to realize substantial gains within remarkably brief timeframes. This market is known for its propensity to yield overnight windfalls. Yet, amid this promising landscape, a crucial caveat emerges: not all cryptocurrency ventures that populate this market are bona fide endeavors. Regrettably, certain projects exist solely to deceive and exploit those new to the world of cryptocurrencies. Consequently, a pressing question arises—how can one discern between projects bearing remarkable potential and those orchestrated as fraudulent schemes? Within this discourse, we shall delve into the concept of cryptocurrency "gems," unraveling their essence, while also elucidating the pivotal factors that enable one to identify these gems and, concurrently, shield themselves against the clutches of cryptocurrency scams.
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
What Exactly Are Cryptocurrency Gems?
Cryptocurrency gems encompass coins and tokens that exist within the realm of cryptocurrencies, bearing an undervalued status and eluding widespread attention. These hidden gems hold the latent capacity to bestow substantial returns. Frequently, their price tags rest at remarkably modest levels, often sinking below a solitary U.S. cent per individual unit. Additionally, these unique entities flaunt comparably diminutive market capitalizations, denoting the cumulative valuation of all circulating coins or tokens. This inherent feature makes them susceptible to exponential value surges, necessitating far less investor involvement and trading volume to propel their worth upwards by a factor of 100.
Now, the inquiry unfurls: how does one go about identifying these rare opportunities that promise a potential 100-fold growth? A comprehensive exploration is in order.
What To Look For When Serching For Crypto Gems
There are quite a few criteria that you can use to determine whether or not the reward of investing in a cryptocurrency outweighs the risk of doing so. A coin does not need to have all of them, but the more boxes a project ticks, the better. This also increases the chances of the project becoming a 100x cryptocurrency gem. Let’s take a look at some of the most important criteria that can be used to identify cryptocurrency gems.
The Project’s Team
The first thing that you want to get as much information on is the team behind the project. Try to find out if the team has previously worked on other projects in the market and how capable they are of delivering on the promises they’ve made to their community. It will be good to also see how active the community is on social media as well as how open they are to community feedback and if they actually act based on the feedback. Lastly, see if you can find out who the backers of the project are. Most venture capital firms provide information on cryptocurrency projects they have backed in the past and how well those projects have performed.
The Price of the Coin
Looking at the price of a cryptocurrency is also important when trying to determine if a coin or token is a cryptocurrency gem. By looking at the price of a coin, combined with its total circulating supply, you will be able to calculate the upside potential of the coin or token. By combining the price of the coin with its circulating supply, you can work out its current market cap, as well as estimate what the price of the coin may reach when looking at potential forecasts for the project’s market cap. When forecasting the market cap, it’s important not to be unrealistic about what the project’s market cap might reach. A good rule of thumb is to look at the market cap of each of the projects in the cryptocurrency market, and then divide it by the number of coins in the total supply of the coin that you’re trying to calculate the future price of. Although there are multiple factors that will determine if the project can reach a specific market cap, using the market caps of other coins and dividing them by the total supply of a project will give you a more realistic target of what the price per coin will be.
Analyze the Smart Contract
Many cryptocurrency coins are built on top of blockchains like Ethereum and Binance Smart Chain using smart contracts. These smart contracts cannot be changed once deployed and set all of the functions and parameters of the coin. Looking at the smart contract code, you will be able to see if the owner is able to mint new tokens, how many tokens he or she holds, and how the coins were distributed. You will also be able to identify any potential exploits due to bugs in the smart contract.
The Number of Holders
You can keep track of how many wallets are holding a specific coin or token using block explorers such as Etherscan and BscScan. Ideally, you’d want the number of wallets holding the cryptocurrency to be continuously growing, and wouldn’t want all of the coins stored in one wallet.
Now that we have taken a look at what to look for to identify cryptocurrency gems, let’s take a look at what to look out for so that you can avoid falling victim to scams.
Red Flags to Look Out For in Cryptocurrency Gems
A good rule to remember is that if it’s too good to be true, then it probably is. If the project’s team is saying that the price of their coin will pump 100x in a week, or that you will get a 10% daily return on your investment, do not invest in the coin! In these situations, the teams are just trying to pump their coin so that they can increase the value of their own holdings before dumping their holding in the market for a profit.
Possible Exploits in the Code
Reading a smart contract’s code and understanding what is going on in the source code is best left to the more technically-inclined community members. Many people just rely on the fact that someone else did the due diligence and the smart contract code is safe. Some projects may also increase the legitimacy of their coin by hiring firms like Certik and Hacken to audit the project’s smart contract and then publish those results. This gives a higher degree of reassurance that the smart contract can’t be exploited.
Tokenomics is a term used to describe the economics and business model of a cryptocurrency. The tokenomics will shed light on details such as how the coin will be distributed, its use cases, the vesting schedule, the number of coins in circulation, and the total supply. Usually, coins with bad tokenomics have founders holding a large portion of the coins, or initial backers and cryptocurrency investors who bought coins at a huge discount and are just waiting for the perfect opportunity to dump their coins for a decent profit.
Finding Crypto Gems
Exploring the landscape for cryptocurrency gems encompasses several strategic pathways. A paramount avenue involves leveraging price tracking platforms like Coinmarketcap and Coingecko. These virtual arenas serve as repositories for a comprehensive array of tokens prevalent in the market, encompassing those with even modest trading volumes. These platforms, thus, function as invaluable tools for uncovering undervalued coins that hold significant potential.
Furthermore, the dynamic realm of cryptocurrency witnesses the extensive utilization of group messaging platforms such as Telegram and Discord. These channels burgeon with activity within the cryptocurrency community, serving as crucibles for traders and enthusiasts alike to congregate. These platforms not only foster discussions regarding novel coins and transmit trading signals but also enable collaborative quests for hidden gems. Additionally, development teams frequently form dedicated groups to streamline communication, ensuring seamless interactions with their communities and facilitating announcements.
For those keen on seizing early opportunities within promising projects, decentralized exchanges offer a promising avenue. These exchanges often serve as the initial launchpads for newly minted coins. Owing to the streamlined nature of decentralized exchanges in comparison to centralized counterparts like Coinbase and Binance, projects favor their listing on the former. This choice expedites the trajectory from project inception to market penetration. However, it's paramount to exercise caution when investing in coins newly listed on decentralized exchanges, as the ease of listing can also attract potential scammers. Rigorous due diligence becomes indispensable before committing funds to such projects.
In essence, armed with these insights, you're now equipped with a robust arsenal of tips to discern potential cryptocurrency gems. Simultaneously, you're well-versed in the red flags that serve as sentinels for potential cryptocurrency scams, allowing you to safeguard your investments effectively.
The cryptocurrency market offers many opportunities for some wild returns on investments if you can find the right project. There are a lot of criteria to look out for when trying to identify cryptocurrency gems. However, the main criteria are how many wallets hold a specific token and how many tokens they hold, the team behind the coin, the price of the coin, and the quality of the project’s smart contract source code if the project is built on top of a blockchain as a smart contract. There are also some red flags to look out for such as teams over-promising, bad tokenomics, and possible exploits in the project’s source code. There are a lot of resources available to search for cryptocurrency gems. You can utilize group messaging apps, new decentralized exchange listings, and price tracking websites. However you want to go about it, you will need to do your own research to better your chances of finding the 100x cryptocurrency gems.