Ask HN: What is your methodology to invest in cryptocurrencies? I am trying to understand:
- what kind of research do you do?
- what kind of data is important to you?
- what calculations/analyses do you do?
- what analyses do you ran after you purchased them? I feel there's no best practice yet on how to investigate a new asset and so I am doing a reasearch to then compile a summary/blog. Thanks! |
Ponder for five minutes, sigh, walk away.
In case it is, then how do you approach evaluating the price?
For most cryptocurrencies, most people come unstuck at that point and just punt.
The only analytical approach I could foresee being useful would be if you could quantify the quality of the marketing of the new asset. My expectation is that that likely drives the bulk of the pricing most of the time.
Do you look at specific data points to understand if the asset is overvalued or a scam?
Well yes. What you do is calculate the expectation of the future cashflows and PV them.
If there aren't any future cashflows then the fair price is zero and anything else is overvalued. That doesn't mean you shouldn't buy it but you should treat it like any other form of gambling.
If the asset creator won't release any quantifiable information about the future cashflows then the correct response is to assume it's a scam until they do.
That leaves the cases where there are quantifiable cashflows. Some smart contracts fall in this category. What you do then is analyse said cashflows and decide whether the price is justified.
But for protocols like Ethereum or Stellar, how do define "future cashflows"? Do you use cost of transactions? Or what is the thinking there?