Marcus Spiske via Unsplash

1. Circulating Supply versus Max supply ratio:

This is the number of tokens that have already been distributed compared the number of tokens that will be distributed once distribution is over. This varies greatly from coin to coin. BTC for example has 16,931,000 tokens circulating compared to a 21,000,000 supply. This leave the circulation to max supply ration at about 1.17:1. Stellar Lumens has 18,550,000,000, yes 18 BILLION in circulation. However, the total supply is 103,788,040,162. So with the math, that is a circulation to max supply ratio to be 5.72. My suggestion is to play around with the coins you have to see what the ratio looks like.

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2. The Fumanti Index:

The Fumanti Index is a formula created to assess the overall strength of the market. It’s simple, and it works like this.

You go to Coinmarketcap.com or another reliable exchange that lists cryptocurrencies by market cap. Then, you look at the number of coins with a market cap above 1 billion dollars. Today, March 21, 2018 at 2:30pm, the Fumanti Index Number is 23 because Bitcoin Gold is the 23rd coin, and the last to have a market cap above 1 billion.

The lower this number is, the more you should be investing. The higher the number, the larger the bull.

In December/January at the market’s height, this number was as high at 40. Yes, 40 coins had a market cap above 1 billion. The market was super strong. This index will be adjusted in the future after the market cap reaches one trillion.

3. Market Cap:

The market cap is the market value of a company’s outstanding coins, tokens (in the traditional stock market we’d call it shares). The overall market has a market cap, too. Which is just the sum of all the outstanding shares for all the coins on the market. The overall market cap is probably talked about more than individual market caps. However, individual market caps are as important, too. If a coin with a similar value in a similar industry is at a token price way below its competitiors, this coin may be a good value. Similarly, if a coin is priced way above its competitiors, then it might be inflated for some reason, maybe not. Its all about token value within industry.

4. White Paper:

Basically the business plan behind every coin. These rage in quality. Some whitepapers look like they were put together by a three-year-old, others are very detailed, organized, and fire me up to want to invest in a specific coin. Thoroughly reading the white paper will help you get a sense of the Road Map of a coin, the development team behind it, and what the actual purpose of the coin is (which is surprisingly underlooked in the crypto world).

5. Twitter/ Social Media Following Size:

This is not the end-all decision factor, nor should any one of these factors be considered most important. However, following is everything, especially with earlier products. You probably want a coin that has a reputation of excellent communication with its stakeholders, such as Omisego or Binance. Crypto definitely has highs and lows so you should have a team that will be transparent with you during the toughest moments.

6. Do you think the purpose behind the coin has a viable future, 15 years into the future?

Tim Draper recently told the Bad Crypto Podcast that he only invests in things that will be around 15 years into the future. If it can’t pass that basic test, it won’t get his backing. This is coming from the guy that correctly predicted Bitcoin’s 10K Price point recorded live on the radio 3 years before it happend.

So if all the other factors work out, if it has the right market cap, if it has an incredible team and advisory board, if it has its own subreddit that is super active, etc, then put it to this test.

Will the world somehow improve or change for the better because of this product? If you can’t even answer this question , then you should probably run away from whatever coin it is you’re looking at.

We’re still in the early days of Blockchain, however, industries are beginning to form. There are a lot of ideas, both realistic and totally out there. Investors should be especially careful when it comes to new investments that are the first of its kind. Competition is good for businesses for a reason. Like I said before, examine other coins within the same industry.

My dream is to blog full time, so my ETH wallet loves donations 0xac48c872d99f8d2c5cace6ee57cedc9e2019f99d

BountBase is a virtual currency marketer & content creator that connects coin development teams with the larger blockchain community. You can follow us on Twitter @BountyBase

Contact the author at Andrew.Mailen2@gmail.com

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