Strategies to pick low-market cap projects

The most difficult part of picking a project coin is ensuring you're not investing in a pipe-dream.  If you don't know what to base your investment off of, its impossible to keep a level head when the natural variance of price comes in.  Here is how I ensure the edge is in my favor, and how I know when to cut my losses as well.

For the purpose of this article, I am going to use three coin examples so that we can use deductive reasoning and potentially eliminate, or support them.

Coins of Choice:  

 

Safe Exchange (SAFEX)

SIGNATUM (SIGT)

OBSIDIAN (ODN)

At the time of this article (10/2/2017) the market caps are as followed;

SAFEX - $.010256/coin and a market cap of $22 million

SIGT - $.030712/coin and a market cap of $3.3 million

ODN - $.570093/coin and a market cap of $13.9 million

The first thing we should look at with a coin;

USECASE - Does this coin have any mass market function?

SAFEX - Decentralized and anonymous marketplace blockchain

SIGT - Closer to anonymous internet access(via tor nodes), with various projects in the roadmap

ODN - Anonymous + Secure Messenger (compare to whatsapp)

How big is the 'mass market' field of these projects?

SAFEX - Amazon did 136B in sales volume for 2016 - Ebay Did 9B for 2016

SIGT - Harder to peg, they want to target marketplaces, exchanges, and even paying merchants with their "signatumpay".  All combined, this would be one of the largest mass market potentials.

ODN - Whatsapp alone has 1.3B active daily users as of ~July '17, Facebook messenger has 1.2B as of ~June '17.

Looking at the three of these coins, all three seem pretty strong so far, but remember these are the initial barometer for INTEREST in a project.  This is how we decide what to dive into and what we may be interested in.

Dev. Team:

While I think Dev team can be important, I tend to shy away from coins who have "famous" names.  The reason is a personal one, I feel that there will always be an agenda behind pushing fame for coin publicity.  This does not mean the project is a bad project, what this generally means to me is that the project will be over-valued due to the fame and expectation.  Remember, we want sleepers.

Is my Dev team active?

Ask yourself this question, can I talk to the dev team somewhere?  If not, why not?  Remember that as humans, we have ego and emotion.  Your dev team wants to feel accomplished and supported by their community.  Everybody wants to hear 'Good job!'  I would be extremely concerned if I can't contact the dev team SOMEWHERE.

On the flip side of this, be cautious for those who are out there hyping your coin.  You want to be as cautious about the CONTENT as you are about their activity.  If your dev is only out there to spread and twist rumors and bring to light insignificant news as if hes pumping the price, this is a big red flag for me. This is the equivalent to the guy who talks about how big his cock is in every conversation.

What I like to see is the human element behind a person, emotion, silly conversation, and a natural bonding of dev to community.

------------------ Can I contact the Dev team somewhere?

SAFEX - Yes, most of the team is active on twitter, and very active on SLACK.  We can contact all members on some medium.

SIGT - Yes, they are active members of the community and openly post all their communities and means of contact.

ODN - Yes, active members of the community, interestingly enough the reddit community is fairly small and inactive.  However, slack is very, very active and the community seems strong.

What information is out there about this coin?

What we're looking for isn't necessarily a clear, and concise play by play.  All I want is a very clear direction, and a short-term play-by-play.  Remember that Dev's tend to be nerdy, and whether or not you understand everything being explained, you certainly should attempt to.  We want to know our dev is nerdy and creative, rather than slick & smooth.

I think that all three of our chosen coins(Safex, SIGT, and ODN) line up with this.

What are people saying about this coin?

SAFEX - People are nervous, the overall picture is clear but is muddy and lacks intricate detail.  This is naturally unnerving for your average investor and makes me more confident to invest.

SIGT - Seems to be a more nerdy community rallying behind the mining + POS.  This is actually a major negative.  Almost all community chatter seems to revolve around these items, instead of discussing project and project potential.  Any time a community has a focus on the immediate profit, and not the project, my spidey senses tingle.

ODN - People seem very happy, and welcoming.  Its probably more difficult to put a pulse on a social platform because the community is naturally going to be more clique-like and potentially less mature.  The overall picture is less clear, what we have is a messenger which seems to have a great start and an actual product, but the future plans and developments are unclear.  For SIGNATUM and SAFEX, there is a framework for what we're working towards, with ODN we don't have the slightest clue what comes after this nearly completed messenger project.  This is a large negative in my eyes.

How long do I have to hold this coin to start seeing major movement in the development?

SAFEX - There is a wallet already, and shockingly, the alpha blockchain is being developed right now and is planned for release in this 4th quarter.  This is huge.

SIGT - Their version of a Marketplace and web wallets(web wallet still says coming soon, but is labeled as beta) are in beta already, the signatum pay and signatum exchanges I was unable to find more information about.  Marketplace seemed to have major disadvantages for the coin itself.  Listing fee is too low at .15% ( industry average is upwards of 6%, there is zero reason to cut all your profits like that and playing the walmart game always concerns me.) in addition to that, the buyer pays for it.  I can't seem to find any barrier for entry to be a seller.  

ODN - It is too unclear what major developments are in the pipeline.  We know there's a messenger, outside of that the future is unannounced and could range from a messenger only coin - to taking us to the moon.  We simply have no idea.

Can we determine a possible market cap potential relative to the current size of cryptocurrency market cap?

SAFEX - I think the use-case here is very large, but I don't think it will threaten bitcoin until this all someday becomes so easy to use that grandma can do it.  The community use will be the limiting factor, however with anonymous coins and marketplace, the potential is there.  I can easily see a top 10 market cap coin, and I think anything beyond that will be decided by ease of use.  Lets split it down on the low end and call it a $5b potential, which would put the coin in the $2 range with current prices.  

SIGT - This one is harder to peg, and if I had to estimate purely on what we know, I see much less potential due to lack of differentiation.  I think that this coin will lose marketshare from the slew of similar coins out there (read, not-truley anonymous marketplaces.)  There are quite a few pure marketplace coins and the only potential differentiating factor here is signatum pay.  We do not yet know what the scope of that will be, or what customer base they plan to target.  Unable to target at least a clear potential is a negative for this investment.

ODN - This at the moment is only a messenger coin, however with a minuscule fee on billions of messages a day, this could be decent in scale.  45 billion messages per day are sent on whatsapp alone.  I can see this coin becoming a top 10 coin IF a mobile app is developed.  Anonymity in our day an age is huge, even more so in sensored countries.  I would put this on the very low end until more information is out about the future plans.  #10 is 1.4 billion, or $14 once all potential coins are out.

Remember that as a project grows, we HAVE to continually re-evaluate all the above points and if it no longer lines up, we need to exit.

Using the information we've found, what is the investment outlook for these coins?

SAFEX - I am very long term bullish, I think of the three right now and the information we have available to us, this is by and large the biggest potential out there.  The great thing about investing in a project this early is that there isn't much "pump" type news to be released.  I believe that Q4 is going to be monstrous for this coin, and it will be a coin we all look back and wish we put more money into.

SIGT - The target of signatum pay needs to be more defined, and with the current community focus and lack of any traction on this coin even though we have a functioning marketplace beta concerns me.  I will not be investing in this coin.

ODN - I am bullish on this coin for the time being, the release of future projects will help me determine how much of my portfolio to allocate, but I do have a portion of this and I think you should too.  The beautiful thing about social media is how viral it is, the potential for something like this to catch on and become the norm is enticing.  Not being a very social media hungry guy, I can't currently go all in on a messenger alone.  Future announcements will be very enlightening for this project.

All cryptocurrency is currently in the high risk high reward zone and you should only ever invest what you are comfortable losing.  Although we can use deductive reasoning to help us determine major potentials, there are so many variables that could change the course immediately.  

I am in no way a financial planner and none of this constitutes financial advise.  This is merely how I determine which small projects I want to invest in for the maximum gain.  It is my hope that enlightening the community on some of my investment strategies will help raise the curve of the average investor mindset.