Are you feeling like you are late in the ctypto game? This blog post will help you discover 5 Ways to Spot an Undervalued Project.
When you are looking out for gems in the sea of new crypto projects, sometimes it’s very tough.
The cryptocurrency marketplace can be incredibly lucrative or frustrating, depending on the kind of investment decisions you make.
If you select projects carefully and carry out proper due diligence, you can minimize risk and maximize your odds of getting those gems you want.
We have put together this tips for you so, let’s identify those 5 Ways to Spot an Undervalued Project
The primary focus is on pre-launch and early-stage projects, which can be applied to more established projects easily.
A very important note to remember: Never invest more than what you can afford to lose.
In the Cryptocurrency space, there are no certainties in the investment game.
5 Ways to Spot an Undervalued Project
1. By Checking its Market Valuation
The simplest ways to identify an attractive investment opportunity to know whether an asset is undervalued.
Check the initial market capitalization or projects that are yet to get launched
What is this initial market capitalization?
It is the value of all the token units that will be in circulation followed by its token generation event
Any project that has an initial market cap that is lower than its expected fair value can be classified as a lucrative investment opportunity.
Why?
Because it shows that the market will move the token price toward its fair value in the days and weeks after its token generation event.
If a project launches with a lower than expected market cap, it means that the project has a strong chance of gaining value until it achieves its fair value.
It will interest you to know that projects that have a higher than expected market cap due to a sudden, large inflow of orders may eventually have to fall back to a lower, fairer market cap.
An example of a project with a lower expected market cap is AstroSwap.
AstroSwap token had a market cap set at $120,000.
Because it was the first DEX on Cardano, it became easy to compare its market cap to other famous DEXs like PancakeSwap and Uniswap.
Their market cap is up to $1 billion.
Based on this, AstroSwap moved very fast closer to its fair market value after its launch, mooning from a $120,000 to $120 million market cap at its peak.
2. Spot an Undervalued Project by Checking its Backers
Before you dive into any crypto project, it’s is advisable to see the people you’re investing alongside with.
This means you should do your research on its earliest known backers. Do this by paying close attention to any noteworthy angel investors and venture capital they have onboarded.
Any goodwill always has a list of their most prominent backers on their websites.
Note: This is primarily for venture-funded projects.
Port Finance is an example of a project that has its most prominent backers listed.
It is backed by a range of well-established Venture Capital funds, and it includes Morningstar Ventures, JumpCapital, and Rarestone Capital.
With this provided information, it becomes easy to navigate to each Venture Capital’s website to see their track record.
Morningstar Ventures has also backed early titans like Elrond, Covalent, and Yield Guild Games.
More importantly, Port Finance was backed by AscendEX.
Having an exchange backer early enough can be a strong indicator of a CEX listing down the line and sure enough.
Apart from having a list of well-respected Venture Capital funds with great track records, you would also want to have backers that are known to add value to the project however they may come.
It can either be through assistance with marketing, strategy, development, or something very significant.
If for any reason a project is backed by an obscure Venture Capitals or the project completely lacks any backing, this could be a red flag.
Don’t invest in projects you have faint or no idea about.
3. Scrutinize its Tokenomics
The major key to any successful project is having sustainable tokenomics.
No matter how good a project is, if it has highly inflationary tokenomics it will surely lead to price decline if there is no sufficient utility to back up the project.
Some projects are not transparent about their token release which makes it more challenging to accurately know how fast a token’s supply will inflate.
If a project has transparent tokenomics, it becomes easy to work out if this will be a problem or not
These are the best ways to identify whether a project will suffer from high inflation or not they include;
Checking the power given to its early backers, and advisors, and noting whether the project is holding a substantial airdrop, or is running a long-term yield farming program.
If a project has a high amount of inflation, check to know if there are any measures set in place to reduce the circulating supply like any burn mechanics or a staking system.
One of the most excellent examples in the Cryptocurrency space is PancakeSwap.
The cake project suffers from a certain level of inflation that would cripple most projects at a total of 371,600 CAKE per day.
The project also offers a very strong utility for the token with lots of burn mechanisms, his will help ensure supply and demand are equally balanced.
4. Check its TeamThe key to a strong project is the team members
This is the way you should weigh a project team;
1. Having an executive team that is subject to the majority of your inspection. Also give close attention to the background and experience of the CEO, CBDO, CMO, and most importantly, its CTO.
2. Choose projects that have an accomplished, experienced team behind them, this will help increase your chances of success.
Let’s use this upcoming futures ecosystem and basis trade aggregator protocol Precog as an example
Use this breakdown to know how you should do some basic due diligence on a team before diving your funds into a project.
1. The CEO
Because the CEO is the project lead and the individual responsible for organizing and managing the team, having a well vast CEO is important.
If you look at Gehan Rajapakse’s LinkedIn profile, you will discover that he founded and managed a good number of startups in different niches over the last decade which shows he has a great demonstration of a strong business sense.
2. The CTO
Artur Ferreira, founded UTrust and it is internationally as one of the best performing projects.
He is also a partner at an established crypto fund.
3. The CMO
Xavier Garcia.
He has a high-level marketing roles in the blockchain space for half a decade, which is majorly focused on blockchain-based financial products.
Having a strong team also shows how well a project will go same for having a weak team can be a sign of weakness.
Also, watch out for recorded success and a history of how they held on over the long term.
It is also good to look for other ways to verify the team’s achievements by looking over the project’s GitHub and the testimonials of other trustworthy individuals.
5. Gauge its Market Fit
The cryptocurrency market is very volatile.
Projects that like they would perform extremely well at one point in time may end up not performing so well when they launch.
The same goes for some projects that seem to be less after their launch, they may evolve into just what the market needs.
Positioning yourself on top of the market by having a general understanding of current trends after you must have done your research is essential for identifying projects that are either good or bad
The simplest to weigh a project’s market fit is by carrying out some basic keyword analysis.
With the recent launch of Bloktopia, all you have to do is simply browse its website. You will discover that it is building in some of today’s most hyped and marketed niches.
This includes decentralized real-estate, gaming, non-fungible tokens, and the Metaverse in general.
To know whether a project is in line with current trends, check the performance of some of its keywords. Do this by monitoring trending tags on social media.
Building its decentralized Metaverse on Polygon, Bloktopia launched just when the interest in the Metaverse reached its peak.
The platform is in its developmental phase long before the Metaverse became reality. This gives it a head start over the competition.
Wrapping it up
Now you know the 5 ways to spot undervalued project
Don’t be in a haste to ape into a project.
Always double-check to know if the project you are scrutinizing isn’t just following current trends so they can dupe investors.
Don’t ignore red flags because of greed.
