As we kick off 2018, the crypto bull market rages on, with a market value that is edging closer to the $1 trillion mark.

Despite some sizeable pullbacks, the upward trend is a force to be reckoned with, and almost everything is swept up in a sea of green numbers. But the smart money knows that long-term, successful investing is always backed up by real value. That’s hard to come by in a world where Dentacoin is valued at over $1bn (yes, dentists need blockchain, too, apparently). But don’t panic, we’ll help you sort the real money makers from the coins that we’ll all be laughing at in five years’ time…

Be clear on value

Unlike most traditional investments, cryptocurrencies carry no inherent value. That’s not to say that they carry no value at all, but it’s certainly a lot easier to measure dividend cover or price-to-earnings than lines of computer code. The price of a crypto is defined by the value we place on it, and most of the market is driven purely by speculation. Let’s face it, how many of us really use Bitcoin for anything other than dollar value growth?

Despite the difficulties in defining value, it’s not impossible to differentiate a good coin from one that is simply rising with the tide. Here are a few questions to ask yourself when trying to pick a gem:

What is the purpose of the coin, and how likely is it to hold value? A currency that doesn’t scale is likely to be useless (unless you’re Bitcoin, of course). Platform tokens are pointless if people can use the platform without the token (XRP, anyone?). And all things being equal, a finite supply means a higher price. Always ask yourself why anyone would buy the coin for more than you are paying for it. What makes the coin unique? There are over 1,400 cryptocurrencies and the list is growing every week. A huge number of those are forked from other coins, and many are nothing more than a simple copy and paste job. There’s a reason why Litecoin’s market cap is less than 10% of Bitcoin’s, and that’s because it offers next to no innovation on the original coin. How big is the potential market? This isn’t an exact science, but a good way of judging long-term potential is to assess the value placed on other coins, assets or technology that fills the function of what you are buying. For example, if Raiblocks really can deliver on what Bitcoin started, a £200bn market cap has to be possible. And longer term, if solid cryptocurrencies really can perform the same function as gold or cash, the current market starts to look very, very small!

Make sure there is a good team behind it

A good team can make or break a coin, and for smaller projects, this is even more important. Look for those with a strong reputation and be cautious of anyone who is not transparent. Open dialogue with the community is a must, so active Twitter feeds, Discord groups and regular blogging are all good signs. Beware pre-mines or ICOs that provide huge rewards for the founding team. And remember, a good team isn’t just about technical expertise — it takes a solid marketing and business development effort for a coin to really take off.

Track progress

This sounds like an obvious point to make, but make sure you’re not buying a pipedream. ICOs have become an easy way to make a quick buck, and over 90% of the coins out there will one day carry zero value. We rarely invest in anything that doesn’t already have a working product, or at least something close to it. And while inspiring whitepapers are ten a penny at the moment, not having a clear roadmap or vision is even worse (take a look at Colossus Coin XT for a great example). Equally, we would run a mile from a copy and paste job (*cough*, Tron, *cough*).

Our biggest tip when it comes to tracking progress is to check GitHub repositories. Most good development teams will leave their code open for review, and GitHub allows you to track changes and development as it happens. For those who know how to programme, you can also check the quality of the code, as well as the frequency of updates.

Be sure of liquidity

With cryptos, it’s sensible to fear the absolute worst-case scenario. When Mt Gox went bankrupt in 2014, thousands of investors were left without access to their money and the price plummeted more than 70% over a couple of weeks. While the fear alone was enough to rock the market, a bigger problem was that liquidity dried up when the biggest Bitcoin exchange died.

Now, times are different in 2018, as exchanges are popping up all over the place. But if your coin is only listed on one or two of those, be careful! If the exchange goes under, your coins are not worth a cent. That said, the additional risk of investing early, before a crypto is listed on multiple exchanges, can pay off big time. RaiBlocks is a perfect example of this. Early adopters have seen massive gains after braving the world of BitGrail, which is a sort of crypto version of a crack den.

Do your research and give yourself a good night’s sleep

Most of us will have spent entire days glued to a smartphone, constantly refreshing Blockfolio. Those who have real skin in the game have probably also had their sleep pattern destroyed by the same urges. There’s nothing like waking up at 2am to see Bitcoin has lost half its value because some Korean bloke reckons the government are banning it. So, our advice is to only invest in projects that you truly believe in. After all, you are much more likely to continue holding these in a crash.

Unfortunately, all of this means that you may miss out on some short-term gains, and we all know how that feels. Your mate invested in TesticleCoin yesterday and it’s already up 1,200%. But stay strong. Over the long-term, sound analysis will always win, and remember, your reward isn’t just financial. You also get to enjoy some proper sleep!