To find undervalued cryptocurrencies you don’t need to look very far. There’s an abundance of them out there since the altcoin bear market began in February.
This article isn’t about listing some picks, but more about answering the question: what exactly does it take to determine a cryptocurrencies value?
This is a question that is hard to give a definitive answer to.
The reason why is because many small cap crypto have yet to create a real business which in turn creates high volume of transactions on their network.
That is how true value is determined.
More often than not the token or coin is used as entry credit or payment for access to the companies service, or to convert money into for a fast transaction then back again.
Either way, a business with lots of customers would have huge transactional volume in their tokens.
A good example of this is Binance coin. It’s used as a way of lowering trading fees on the popular crypto exchange Binance. Because they have a huge customer base there’s great volume every day.
So How To Determine Undervalued?
For finding undervalued cryptocurrencies at this moment in time you should be looking for cryptocurrencies with high potential but low market caps and small supply of tokens when compared to their competitors.
For instance here is an example I was looking into this week. Take Restart Energy MWAT.
This is a renewable energy supplier based in Romania who have a real business (generated $20 million in 2017). Their news has been constant since ICO, and they are busy applying for energy supply licenses in major European countries.
A few ticks for my boxes.
They have peers to compare to, but the main one would be Poweledger POWR. Powerledger have a circulating supply of around 360m tokens, but a total supply of 1 billion (which means more circulating supply to follow). A market cap currently of over $200 million.
They are slightly ahead of Restart Energy in terms of blockchain, but not ahead as far as actual customers and real world business.
Compare MWAT. It has a circulating AND total supply of 415 million. But currently only a market cap of $27 million.
To me they seem undervalued compared to Powerledger. However POWR is on Binance while MWAT is on Kucoin.
This is where your judgement comes in. Read the news and decide where MWAT should be if they begin to catch POWR up in terms of the blockchain side of their business.
You can use this idea to find undervalued cryptocurrencies in many different industries. Picking out the companies who offer a greater return compared to their peers.
The pitfalls with this is that you are at risk of taking positions in companies that could fail.
But let’s face it, you are with most cryptocurrencies!
Remember for this to be effective you need to only buy into the stories of companies who have been supporting their tokens with constant news and updates on their progress.
Try to avoid the cryptos that have no active Telegram and social channels. Make sure they update news regularly, on their own blogs or Medium / Steem etc.
And remember the old adage. Never invest what you can’t afford to lose.