How to compare coins and refine your investment strategy

Compare Coins

With the ever-increasing amount of crypto-assets, comparing coins is a fundamental exercise for anyone interested in this ecosystem. Whether your priority is technological features, economic purpose or for pure speculation, comparing crypto-assets is a good way to stay on top on what this multifaceted industry has to offer. This task might seem overwhelming at first glance but with correct methodology and adequate tools this is achievable in reasonable time. Here’s a guide giving you some insights on what features you should be comparing & the most important aspects to investigate.

Economic purpose

Decentralization and transparency that comes along with blockchain have the potential to disrupt multiple industries. Each digital currency has a specific economic purpose that you have to identify before any further investigation. Which problem is this currency trying to solve ? What sectors are potentially impacted ? What are the main features of the currency ? Answering these questions is important to understand and break down the market. Some great resources are available to help you bundle currencies by sectors or features. Coincheckup implemented a comprehensive tag system that makes it possible to filter out currencies by category. With nearly a hundred different tags, this is one of the best tools to sort cryptocurrencies.

Some currencies and their sectors

  • Advertising : Basic Attention Token, Mithril, AdEx
  • Energy : Power Ledger, Robotina, Envion
  • Gaming : Enjin Coin, WAX, Loom Network

Some currencies and their features

  • Privacy : Monero, Zcash, Bytecoin
  • Stable coins : Tether, USD coins, TrueUSD
  • Smart contracts : Ethereum, EOS, Stellar

Standard market data

Live market data are good barometers of a digital currency current's health. It doesn’t say a lot about the asset in the long run but can still provide interesting insights. Here are some metrics that you can consider when comparing coins.

Prices (USD/BTC)

Comparing prices between cryptocurrencies is actually misleading because they don't have the same circulating supply. The term circulating supply refers to the number of coins or tokens that are publicly available and circulating in the market. For instance, the circulating supply of Bitcoin will continuously grow until the maximum supply of 21 million coins is reached (this gradual increase is related to the process of mining that generates on average new coins every 10 minutes). Alternatively, the circulating supply of Ripple is currently at 42.5 billions. Such a discrepancy in circulating supply makes the price of Ripple much lower than Bitcoin and therefore comparing prices doesn’t make sense in this scenario.

Marketcap (USD/BTC)

Marketcap is a more accurate way of comparing cryptocurrencies. Marketcap refers to the total market value of an asset and is calculated by multiplying a coin’s circulating supply by the current market price of one coin. By taking into account both prices and circulating supply, marketcap is a better indicator of popularity and adoption. That is why digital currencies are ordered by marketcap and not prices in most websites. You can use this metric to separate big coins from small cap altcoins.

Compare coins
Coinmarketcap native order is by marketcap

Price Change vs USD/BTC

Comparing the evolution of prices, also called asset performance, is also a reasonable option. The asset performance is the evolution of the price in percentage over a fixed period of time. It is important to note that a coin going from $0.01 to $0.02 has the same performance (+100%) as a coin going from $5000 to $10,000. In that regards, currencies with small prices are not necessarily a safer bet than the one with a higher price !

24h volume (USD/BTC)

24h volume is the aggregate global trading volume for an asset reported by exchanges over the past 24hrs, in USD. According to this research presented to the SEC by Bitwise Asset Management - 95% of reported BTC spot volume is fake and due to wash-trading or other practices that are not representative of well-functioning markets. Messari created a 'Real 10 Volume' metric that omits volume from exchanges that don't show consistent patterns of well functioning markets. The 10 exchanges meeting that criteria, as identified by Bitwise Investments are: Binance, Kraken, Bitfinex, Coinbase, Bitstamp, BitFlyer, Gemini, itBit, Bittrex, and Poloniex.

Social community

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Cryptocurrencies are inherently community-driven since anyone interested in a specific project can buy tokens in public exchanges. Buyers generally become promoters and contribute to the project’s growth by encouraging other investors to get involved. This can be done by producing content, completing bounties, mining, running masternodes or simply spreading the good word.

The world of crypto follows the same rules as any other social group. There are many communities, sub-communities and private communities spread across various social platforms - Twitter, Telegram, Discord, Slack, Reddit, Steemit, BitcoinTalk and many more. Each one of these social networks has distinctly different content and follows complementary dynamics.

Twitter is based on posts with a 140 characters limit which makes the service very fast-paced. On the negative, the information comes as a torrent and the information is hard to filter-out and prioritize. Reddit is divided into independently run communities, each one focusing on specific content or discussion (e.g. distinct communities are created for each crypto-asset). Reddit is much slower-paced and more about sharing personal opinions, discussing articles and reviewing tools. Telegram & Discord are mainly for coin communities who just want a relaxed space to hang out, discuss their project and it’s news, goals and roadmap. Bitcointalk is the authentic crypto-forum with a very seasoned and experienced community who can challenge the crypto-asset on a technological and economic level.

Keeping track of trends across all those social media is a full-time job. At Cryptonavia we developed a technology that allows you to seamlessly access the data coming from the most active communities. We collect and analyze discussion across social media and provide you with several indicators to detect trending currencies.

Github Activity

Github activity is a way to evaluate how much work and time has been put in the project from the developing team. Considering that developer's time is a costly resource, having many of them committed to a project is a reliable indicator of its health and potential global adoption. Analysing github repositories provides crucial insights to the investors. How many developers are currently active and working on the project ? Are new features being added on a regular basis ? Is the coding team sticking to the roadmap ? Answering these questions can lead to surprising results and refine your investment strategy - some notorious and popular coins having very weak github activity and some small cap altcoins having a very strong & active coding team.

We wrote a more detailed article on how to analyze a crypto github.

Technological features

Blockchain technology has been constantly evolving since 2009 and as a result cryptocurrencies don’t have the same efficiency. There are many consensus algorithms out there. Each of them have specific purposes and are designed for different applications. For staking coins you want to compare the staking type, staking yield (annualized yield for staking at current supply levels) and staking min (recommended minimum number of tokens needed to stake). StakingRewards created well designed indicators to compare staking performance : complexity, risk & reward.

For coins based on Proof of Work you want to compare average transaction fees, maximum number of transactions/second, expected and an average block time. Expected block time is set at a constant value to make sure miners cannot impact the security of the network by adding more computational power. Average block time is evaluated after n number of blocks. If it is greater than the expected block time, then the difficulty level of the proof of work algorithm will be reduced, and if it is less than the expected block time then the difficulty level will be increased

All this information can usually be found in the whitepaper as well as precious information on the roadmap and the team.

Our approach @Cryptonavia

Cryptonavia is a tailor-made solution for analyzing and monitoring the crypto market. We realized that, with the ever-increasing amount of crypto assets, filtering and prioritizing information has become a full-time job for potential investors. To help them in this task, we developed a solution that allows the user to seamlessly access the data coming from the market. Our main objective is to provide a comprehensive view of the whole ecosystem. We created a fully customizable dashboard with a diversified library of indicators. These indicators are built around complementary verticals : live market data, sentiment on social media, github activity and news. We target the most active communities to get the full idea of what's happening in the market. Try it out !