How To Identify A Project That Will Do Well In Bear Market
With the bear market coming in, most of the projects (including Bitcoin) have fallen a considerable amount by value. As per my previous experience in the 2018 bull market, some of these projects will never see the light of the day again. However, there are projects which will bounce back. So, what are the parameters that need to be taken into consideration to measure the resilience of a project? Below are a few key points that may help you in identifying a good project to invest in.
Use Case
Any project that has a progressive use case will do well in the market. Though there is enough room for growth, projects with similar use cases will hardly ramp up similar to the pioneers. Consider Chainlink vs Band Protocol. Right now, such cases are usually Lego Bricks built on original Protocols. For example, collateralization on Liquidity Provider Tokens for loans. Any repetitive project might not make it.
Vision and Fundamentals
Vision and Fundamentals are crucial to measuring a potential of a project. If you can understand a project’s roadmap and map in with the current development you will understand where it stands. Compare that with similar projects, and you will understand who is leading the race. You will also understand the length of the race track for these projects. This comparative study will tell you if a project will make or break!
Community
Communities play a crucial part in a project’s success. In a decentralized world, the projects need to directly interact with the end-users. There are 2 broad types of communities. People who are here for quick bucks, the short-term holders, and the people who believe in the project’s long-term potential. Most of the good projects have communities stuck to them during a bull cycle, or during an extended period of the Build Phase. Some people have not sold during long periods of price stagnation. It is also to be noted that Marketing plays a very important role in keeping the community upbeat.
Leadership
Leadership is also very crucial. Many of the good projects are going to expand. Even though it is recommended that decisions are made through DAOs, mentorship and guidance must remain strong. Previous entrepreneurship experience is preferred. Other skills include industry networking and influence, implementation and delivery, marketing. The Linkedin profiles of the key people should suggest whether they are legitimate or not.
Delivery Road Map
The delivery roadmap is a visual representation of the implementation of the project's core idea. Validate if the whitepaper, and the road map match. Validate if there were previous delivery misses. Is the project able to manage multiple tracks at the same time? Is the progress discussed on a defined frequency in a designated forum? What is the contribution of the community in such a scenario? Any project that has performed well previously and has a huge delivery pipeline should do well in the future. Refer to the example of the gradual increase in the price of the Binance Coin (BNB) in the great bear market of 2018.
Room for growth
Market capitalization is a very important indicator for growth. However, there are projects whose circulating supply is less than the total supply. In such a case, a fully diluted market cap is a better indicator as it demonstrates the true value of the project. Compare your identified project with a similar market cap project in the top 10/ 20 lists in Coingecko or Coinmarketcap and see how much excess the project needs to do to reach the value of the reference project. Any projects that need the other parameters but still ranked low in the Coinmarketcap ranking have a better potential for growth.
In the crypto industry, there are a lot of pump and dump projects which does well even without having the above fundamentals. With such projects, you will lose more than you will gain. A little conservative but discipline investing will give you the maximum results.
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TL:DR DYOR and don't invest in shady looking projects.
Good fundamental framework here. Regarding use case, I agree that pioneers have the first-mover advantage, but everyone should still apply analysis on the subsequent points in the framework. Diversifying among common projects may not be a bad thing either.