A Gambler’s Guide to finding and betting on Altcoins
This is not financial advice and I am not a financial advisor. These are my personal strategies.
In the summer of 2020, I decided to get back into the crypto market. I knew that the halving event was coming up and, remembering the elation and heartache from the 2017–2018 cycle, I decided to use a strategy this time around. I didn’t want to watch my account increase in value only to watch it disappear. Being confined to my house from the pandemic, I had more time to devote to the space so I spent hours researching projects, platforms, and watching YouTubes to learn about the narratives in this cycle.
The first thing that I discovered was that I could easily and passively earn interest on stablecoins and cryptocurrency on platforms like Nexo, BlockFi, and Celsius. Here’s a link to my article comparing the three platforms: Nexo vs. BlockFi vs. Celsius. This became the first leg of my three legged strategy. I decided to take some of my money that was melting away in savings accounts and put it to work in these platforms. The next part of my strategy was developing a position in Bitcoin and Ethereum. In the past, I had been ruled my emotion and it lead to mistakes and moves that I later regretted. So this time I took a dollar cost averaging approach to systematically purchase Bitcoin, Ethereum, PAXG,(and now Chainlink) on a daily basis via BlockFi. I have also elected to get my interest on BlockFi paid in Bitcoin. I wrote an article about this as well: How I am using Bitcoin and Celsius to build my Bitcoin stack.
The third part of my strategy is the speculative portion. This is where I invest in altcoins seeking greater gains than I can get from Bitcoin and Ethereum. This portion of my portfolio is more actively traded, but I do not day trade. Additionally, I do not use leverage and I recognize that over the long term many of these coins may not exist or could dump massively at any time. The idea is that during certain periods, altcoins can outperform Bitcoin and Ethereum at an accelerated pace. These “altseasons” occur with regularity and the easiest way to track them is by following the Bitcoin dominance displayed on CoinMarketCap and CoinGecko. Currently, the Bitcoin dominance is around 60%. If that number drops, that means that altcoins are outperforming Bitcoin. If the dominance is increasing that means that Bitcoin is outperforming altcoins.
In reference to my previous article, I will be discussing how I find and pick coins that would be covering the largest field of numbers with the highest payouts outlined in my roulette strategy. Keep in mind that these are the more speculative bets and therefore, I try to risk anywhere from 1/2%-2% of my portfolio on each of these projects. You visit CoinGecko and realize that there are over 6000 cryptocurrencies to invest in. If you immediately feel overwhelmed and don’t really want to go further down the crypto rabbit hole, it’s probably best to just give yourself some exposure to Bitcoin and Ethereum as these are the coins with the largest market cap and least amount of volatility. However, if you are seeking homerun type gains and enjoy taking some time to research, I encourage you to read on.
While I devote a good amount of time to crypto, I also work and have a family. I’m not really tech savvy and have no interest in studying graphs and following technical analysis. With that said, I also know that I am responsible for my investments and I don’t want to throw my money around on projects that are stupid. I get most of my ideas on cryptocurrencies to invest in on YouTube and by reading the news section on cryptocompare.com daily. I try to only follow crypto only YouTubers as they seem to have a better pulse on the market. If I notice a few mentioning one cryptocurrency, I start to research it. I go to CoinGecko and check the exchanges. Some coins I can not buy in the US and I don’t want to waste my time if it’s not on Uniswap or an America- friendly exchange. I have purchased a few coins using simpleswap.io that has worked ok, but mostly I like to focus on Uniswap only coins.
If you are not familiar with using Uniswap, I would recommend that you go to YouTube and watch a video tutorial on how to use it. It does require that you set up a wallet (I like Metamask). Right now, Ethereum gas fees are extremely high. If you are investing in smaller increments (less than $1000), than Uniswap may not be the best option for you as the fees can exceed $100 on a trade. However, if you can swing the gas fees, I think that now may be a golden opportunity to invest on Uniswap only coins ahead of the Uniswap V3 launch when gas fees are supposed to be reduced. This means that new retail money can pour into the cryptocurrencies that you are purchasing today. Additionally, if these coins get added to a major exchange, that can push prices higher faster.
After finding out whether I can purchase the coin, I try to learn more about the project. I visit the website and sometimes will read the whitepaper (some times this is too technical). If I find the project too hard to understand, I will often skip it and move on to something else. Sometimes, I will visit the Telegram page and ask questions and people are usually helpful. Keep in mind that Telegram has a lot of scammers so if someone direct messages you, it’s probably best to ignore it. I try to think if the project makes sense, how competitive the sector is, and what sort of partnerships the project may have. Currently, it seems like the hottest coins are related to Decentralized Finance (DeFI) and NFTs (non-fungible tokens). The formula that I look for in smaller cap coins is narrative+hype= price appreciation.
It’s also a good idea to learn more about the team behind the project. The bios typically appear on the website. I no longer invest in projects with anonymous developers after losing all of my investment on an anonymous developer project. There are too many options to choose from with developers who are not anonymous.
On CoinGecko, I will also click the etherscan link if it’s a project that is built on Ethereum. This will tell me how many holders there are on the coin. Here’s a screen shot of one of my altcoins (not a recommendation. Do your own research) on Etherscan. I highlighted the number of holders.
This is what is so exciting. There are 100 million addresses that own Bitcoin. On Chain Games, there are 16,130 holders. When I first invested last year, there were a couple thousand investors. As there are more token holders, prices can squeeze significantly higher.
I try not to go too heavy into one sector. Perhaps I will get one small cap oracle, two or three defi projects, two or three NFT projects, and then I will find some unique solutions that are for crypto payment services, videogames, travel. These are nice because they typically have fewer competitors.
If the coin looks good, I usually will add it to a watchlist set up as a portfolio on CoinGecko. I try not to buy immediately after the coin has been hyped, as it often goes up initially and then it will drop back down. Sometimes I will look the coin itself up on YouTube and see what other influencers have to say about it or to check on how much hype the project has gotten.
Once I buy the coin, I typically expect for it to go down in price. This way I don’t get too disappointed if it drops. Sometimes, the project will catch fire and take off. Other times, I have had to hold a coin for months before it does something. When a coin takes off, I try to pull out my initial investment and flip it into Ethereum or a stablecoin if I triple my investment, I like to ladder out (incrementally sell) as the price gets higher or if it’s a project that I’m extremely bullish on, I may decide to hold it for longer. If I’ve taken my initial investment out, I am happy doing what my gut tells me. Half the time my gut is right and half the time it is wrong.
I like using YouTube to get ideas on coins because I figure that the influencers are looking to shill their bags and will probably shill them again in the future. This could lead to more gains down the road. Some of the influencers who I watch are Lark Davis, BitBoy, Crypto Mobster, JRNY crypto, Altcoin Daily, and Benjamin Cowen. There are many others out there, but most of these guys are out their researching different projects. Some other places to get ideas on coins to research are by reading the news on https://www.cryptocompare.com/news/list/latest/, going on Reddit, Twitter, LunarCrush, and Token Metrics (this one has a fee). I’m not on Twitter and have found that Reddit has a lot of shills touting bad projects. But it can also be a good resource to learn more about projects and see what kind of following it has.
In conclusion, these coins should probably not be held through the next bear market. I will probably keep some of the holding in projects that have gone up by huge sums just because it may continue growing and I don’t want to miss further upside. If you find projects that seem logical and have a strong narrative and a decent team, it may not be the end of the world if you are forced to hold it through a bear market. I had coins from 2017 that I sold that have bounced back in this current bull market because they were decent projects. If you are curious on some smaller cap projects that I own, I have listed them below and you may want to check them out, but by no means are these recommendations.**Never invest more in crypto than you are willing to lose**
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