How to find the next 100x cryptocurrency (before everyone else)

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It is always fascinating to hear stories about how someone invested a couple of thousand dollars into a cryptocurrency and turned that into millions of dollars. Two brothers from New York invested about $7,900 into Shiba Inu (SHIB), a coin created as a spinoff of Dogecoin (DOGE), and their initial investment ballooned into nearly $9 million.

Dogecoin itself was already created as a joke and became widely popular with the help of Elon Musk’s tweets. These so-called meme coins and altcoins have created many millionaires, as well as meme stocks like GameStop and AMC. But by the time everyone is talking about it, it is often too late. The biggest gains have already happened, and if you jump in because of fear of missing out (FOMO), the chance of losing your investment is high.

The key is to find these crypto gems before everyone else. And you can do so by applying some strategies on how to find them. I’ll talk about the most used strategies you can use to find the next 10x, 100x, or even 1000x crypto gem. Let’s jump right in.

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What are crypto gems?

Crypto gems are cryptocurrency coins and tokens which are undervalued and out of the public eye, with the potential of delivering massive gains. These new coins often have a very low price, often under a cent each, and provide the possibility of great returns. Because these coins have a smaller total market capitalization (often just called a market cap), it requires a lot less market participation and volume to increase the value of these coins by 100x. For Bitcoin (BTC) or Ethereum (ETH) to do a 100x from where they are now, it would require hundreds of billions, if not trillions of dollars, of new money flowing into them.

It is also important to be able to spot the scams from the legit coins. And even with legit coins, there is a high risk involved. I’ll go into how to spot risks and make wise decisions when buying these coins.

Related: How to Invest in Crypto in 2021

What to look for in crypto gems

There are many criteria you could be looking at to determine if the risk/reward ratio of buying a specific coin is worth it. A crypto gem doesn’t need to have all of them, but the more the merrier, and with it comes a higher chance of it turning out to be a crypto gem. Here are the most important ones:

The team behind the coin

The first place to start researching about a coin is to look at the whole project itself. Visit the website and look who is the team behind it. Try to find out what other projects they have been involved with, how capable they are of delivering on the promises made, how active they are on social media channels, and if they take suggestions from the community into consideration. Look also into how the coin fits into the crypto ecosystem, the possible use cases, and the roadmap of the project.

While researching the team, look also into who the backers of the project are. Crypto venture capital firms often back several projects, and you can research if they are reputable and if other coins they have backed performed well in the past.

Price of the coin

The influence the price of a specific coin has is a tricky subject because the effect it has is mostly due to human psychology. When people consider buying Bitcoin, and the current price of Bitcoin is into the tens of thousands of dollars for a single coin, it doesn’t feel appealing to own just a fraction of a Bitcoin. But when buying a coin worth fractions of a cent, it feels better to say you own tens of thousands of that coin and then make up scenarios in your head about how much your stash will be worth if the coin reaches a cent or even a dollar. This is also why companies often split their stock, to make it more appealing to retail traders.

But in crypto, it is important to take into consideration the total market cap of a coin, which is calculated by multiplying the number of coins in circulation by the price of the coin. As of this writing, Bitcoin is valued at $34,000 and has 18.7 million coins in circulation, giving it a market cap of $640 billion. Dogecoin is valued at $0.23 and has 130 billion coins in circulation, giving it a market cap of $30 billion. Now, many who have bought DOGE have done mental gymnastics and calculated how much their holdings would be worth if one DOGE reached the price of one BTC. But if one DOGE reached that price, the total market cap of DOGE would reach $4.4 quadrillion, about 50 times the world’s GDP. See how that is absurd?

So, keep in mind that a low price is advantageous, as the coin becomes more attractive due to human psychology, but also look for the number of coins in circulation and set realistic expectations.

Analyzing the smart contract

Many of these coins are created as tokens on a blockchain like the Ethereum blockchain or the Binance Smart Chain. They are created through smart contracts, which can’t be changed, and sets all the functions and parameters of the coin. Now, while this may look complicated, after reading into how smart contracts work, and with some experience, it gets easier to understand what the smart contract is capable of and how the token was created. For example, if the owner of the smart contract can mint new tokens, how many tokens he holds, and how the distribution was made. It also helps to check if any exploits due to bugs in the code are possible.

Related: What Is a Smart Contract and How Does It Work?

Number of holders

Using blockchain explorers like Etherscan for the Ethereum blockchain and BscScan for the Binance Smart Chain, it is possible to keep track of how many different wallets are holding the coin, and how much each holds. Ideally, especially for new coins, the number of holders would be increasing as it gets more popular, and no single wallet should hold too much of the coin.

Red flags to look out for in crypto gems

Now that we’ve talked about what to look for in undervalued coins, let’s talk about the red flags you should avoid.

High promises. As with everything else in life, if it sounds too good to be true, it probably is. If the team is saying this coin will pump 100x in a week, or that you’ll get 10% interest daily holding it, run for the hills and don’t buy it. They are often just trying to pump the price of the coin so they can unload their own bags onto these new buyers.

Possible exploits in the code. As mentioned earlier, it is hard to read a smart contract and understand if exploits are possible. So many just rely on the fact that someone else probably already did the due diligence and the smart contract is safe.

Some projects, to increase the legitimacy of their coin, hire firms like Certik and Hacken to perform smart contract audits and then publish those results. It does give a higher degree of reassurance that the smart contract can’t be exploited.

Inactive team and community. In the short term, an active team that understands marketing with raving fans in the community beats a team focusing on building something great but in the long run, even if their project is better.

Bad tokenomics. Tokenomics is a term used to describe the study of a cryptocurrency. How the distribution of the coin was made, the use cases, the vesting schedule, the number of coins in circulation, and the total supply. Coins with bad tokenomics usually have founders holding a large portion of the coins, or initial backers and crypto investors bought coins at a huge discount and are just waiting for their coins to unlock so they can dump them and recoup their initial investment with profit.

Where to look for hidden crypto gems

While some rely on hearing about crypto gems from friends and influencers, the best returns are made when you find these coins on your own, before everyone else. Here are the best places to look for them:

New listings on decentralized exchanges

Whenever a new coin is created, it needs to be listed somewhere so people can trade it. The process of listing a coin on known and reputable centralized crypto exchanges like Coinbase or Binance is costly and time-consuming and comes with many requirements, so many new coins are often listed instead on decentralized exchanges (DEXes), where everyone can list their coin. The most used DEXes are Uniswap and SushiSwap on the Ethereum blockchain, and PancakeSwap on the Binance Smart Chain.

Besides investing in a coin before it is even launched, which is hard to get an allocation for unless you are an influencer in the space and the team reaches out to you, a listing is the earliest you can buy a coin. There are even websites like ListingSpy which display all the new listings on all the different DEXes.

Related: The 5 Best Online Cryptocurrency Exchanges for Retail Investors

Price tracking websites

When looking for crypto gems, you can use price tracking websites like Coinmarketcap and Coingecko. These websites list almost all the tokens out there with at least some trading volume and are great to find undervalued coins. They’re often organized by total market cap, so you’ll have to go quite a few pages back and look for coins with a market cap between $500,000 and $10 million with some trading volume.

Once you find these coins, the next step is to do some research into the project, the team, the community, how active it is, how the price has developed, and then make the decision if the risk/reward ratio is good enough to buy some of the coins.

Group messaging apps

Telegram and Discord are the group messaging apps most used in the cryptocurrency space. Traders create their own groups to discuss new coins, send signals and look for gems together. Teams create groups so they can more easily communicate and make announcements to the community.

These are great platforms to find out more about new and existing coins, keeping up to date with the developments, and exchanging tips with fellow investors and traders. Just always keep it in the back of your mind that many are often just shilling coins they already hold, hoping others buy into them. Don’t blindly trust what someone says instead of doing your own research.

Related: Best Cryptocurrency Signals

Twitter and Reddit

Twitter and Reddit are at the forefront of the cryptocurrency space. This is where the news surface, announcements are made, and where the OGs (OGs stands for original gangsters, those who have been into crypto for a long time) are and discuss everything about crypto. Traders talk about their strategies, teams talk about what they’re working on, and new coins get into trending.

A good alternative strategy is to once a coin has mooned and massively increased in value, search Twitter for those who mentioned it first and follow them to see if they mention any new coins.

Social media platforms

Social media platforms like Instagram, TikTok, Youtube, and even 4chan are where influencers talk about coins and shill trending coins to their followers. While there is often barely any substance behind their allegations, just the fact that they can easily reach millions of followers and hype coins makes it worth paying attention to them to find out about which coins are becoming popular.

Blockchain explorers

Etherscan and BscScan are blockchain explorers which allow you to do a deep dive into any coins and crypto-wallets. There are two ways you can use them to find crypto gems. The first is to follow known wallets and check what they are buying. You can find wallets owned by venture capital firms and check what coins they are buying, or wallets owned by developers and see when they launch new coins. A classic example is the coin Yearn.finance (YFI), developed by Andre Cronje. The price of YFI rallied from $3 to $30,000 within a month, and those following his wallet got in at the very beginning and made bank.

The second way is to research a coin and look into who the first buyers were, and start following those wallets. They are often unknown, but it is easy to follow their actions and check if they made many smart decisions in a row, and by then start copying what they are doing.

Related: Keep Your Crypto Safe – A Complete Guide to Cryptocurrency Wallets

Following trends. Lastly, it is smart to see where the market is heading and be a step ahead of everyone else. When the Ethereum blockchain was struggling with high transaction fees, many migrated to the Binance Smart Chain because transactions were cheaper there. Many projects created there were simply copies of projects on the Ethereum blockchain and saw their valuation rise once people moved over and adoption increased. Another example is when Cardano (ADA) was popular and reaching all-time highs. DEXes like CardSwap and IDO platforms like CardStarter focused on the ADA blockchain also saw their use and valuation rise.

Who should look for crypto gems

Risk takers. Investing in unknown coins with a lower market cap is a risky practice. Due to their nature, scams are more frequent, bugs in the smart contract are exploited and they often fall as quickly as they have risen. So it is more appealing to those who are okay with taking risks and can afford to lose the money invested now and then.

People with time. Looking for crypto gems on your own is a time-consuming task. And once you do find them, it takes time to keep up to date on how the price is developing, how the community is growing, and following any news and announcements regarding the coin.

People with lower capital to invest. Because these coins require little volume to move their price, it is more suited to those with lower amounts to invest. Investing $100,000 into Bitcoin won’t move its price, but investing that amount into a small coin might be too much already. Therefore it is more suited for those investing small amounts.

Who shouldn’t look for crypto gems

Anyone who is risk-averse. As mentioned, hunting crypto gems is a highly risky endeavor. Anyone who is risk-averse and can’t afford to lose the invested capital shouldn’t use these strategies. For those people, a good alternative is to buy coins like Bitcoin and Ethereum and hold them for the long term.

People not familiar with cryptocurrencies. It takes some knowledge about the crypto space to use these strategies. Knowledge on how DEXes work and how to use them, how to use blockchain explorers, and maybe even read smart contracts. This experience can be acquired over time, but looking for crypto gems is probably not the best way.

The bottom line

As you can see, hunting for crypto gems and finding them before everyone else catches on is risky and time-consuming, but it can also be highly lucrative. Keep an eye out for the red flags, be okay with losing some money, and with time and experience, it will get easier to spot these gems and profitably trading them.

Especially now is a good time to look for those gems. The market has cooled off a bit, the prices are more reasonable, and it’s perfect to look for and find those projects and coins which are likely to go to the moon once the market takes off again.

This article originally appeared on JoyWallet.com and was syndicated by MediaFeed.org.

More from MediaFeed:

How to pay taxes on cryptocurrency

 

Over the past decade, cryptocurrency has slowly but surely become one of the hottest investments on the market. While many people were initially skeptical of crypto’s staying power and appeal, the rise of cryptos like Bitcoin has caught the attention of an increasing number of investors. But the IRS is also homing in on crypto taxes—and it’s important that investors know the basics regarding how to file and how to pay taxes on cryptocurrency.

 

Unfortunately, the IRS doesn’t exactly make it easy to understand how to calculate crypto investors’ tax liability, so a lot of the responsibility to get it right lands on the individual investor.

 

Of the 6 things to know before investing in crypto, the fact that crypto is taxed is right up there on the list. Read on to learn all you need to know about crypto taxes, including how to file and pay taxes on cryptocurrency.

 

Related: Guide to taxes and cryptocurrency

 

 

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There are many rules and regulations governing crypto, but the most basic thing to understand is that crypto investors are required to report their holdings and gains to the IRS when they file their taxes.

 

The IRS views cryptocurrencies (which it refers to as “virtual currencies”) as property. Not currency. And because of that, Uncle Sam wants to know what you’re holding, and many crypto holders will have tax liabilities . PDF Fileassociated with their holdings.

 

As they would with any other property they might own, crypto holders who purchased crypto like a stock or other asset will need to keep track of their crypto transactions. They’ll also need to report the value of their holdings (in U.S. dollars) on their tax filings.

 

One caveat: cryptocurrency received as a gift or a transaction, or that is mined, is instead treated as income by the IRS, and taxed accordingly.

 

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In many ways, investing in cryptocurrencies like Bitcoin is similar to investing in other assets, like stocks or bonds. Likewise, taxes are determined in similar ways.

 

For instance, when an investor buys and later sells a stock, they have a tax liability on their realized gains. They made money, or income, from the sale, and now owe taxes against that income. It’s a similar situation when it comes to tax on cryptocurrency.

 

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Here are some situations in which crypto investors will generate a tax liability on their holdings:

  • Cryptocurrency is sold for cash: If you made a profit, that’s a capital gain. Depending on how long you held the crypto before selling, it would either be a short-term or long-term capital gain.
  • Cryptocurrency is used to purchase a good or service: Technically, here you are selling your crypto for dollars, then using the dollars to pay for a good or service. In the selling, capital gains taxes may apply.
  • Converting one cryptocurrency to another (exchanging cryptos): Converting or exchanging one crypto for another is selling the one to purchase the other. As a result, you may have to pay tax on the sale of the first crypto.
  • Being paid by an employer in cryptocurrency: Even if you get paid in crypto, it will get taxed as income.
  • Mining cryptocurrency: Proceeds from mining are typically taxed as income. It’s also possible for some miners to be taxed as a business.
  • Crypto is acquired via an “airdrop” or “hard fork”: In the event of a hard fork that results in new coins, those new coins are taxed as income.

Make no mistake about it, if a return is generated—positive or negative—or some type of income is realized from holdings, your crypto will need to be reported to the IRS. This is why it’s important to keep track of any and all crypto transactions.

 

Many crypto exchanges will keep track of an investor’s transaction history (like a brokerage would with stocks). But it’s not a bad idea to make individual notes, too. Or, if you’re not quite sure what to do, consult a professional.

 

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When it comes to filing and paying taxes on cryptocurrency, here are the steps that should be taken.

 

 

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Reference the list of above to check if any of your transactions may have generated a tax liability. If so, it’s likely you’ll have a return to report to the IRS.

 

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These will need to be reported on your tax return (your exchange can likely provide these in a document for you.) This is a paper trail for the IRS to follow.

 

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The IRS requires specific forms depending on the activity an individual has conducted with their crypto. That could include making calculations on Form 8949 and then reporting the results on Schedule D of Form 1040 , which outlines and summarizes capital gains or losses. Or, Form 1099-MISC , which is used to report income from rewards if the amount exceeds $600 for the year.

 

If you do owe taxes as a result of your crypto investing activity, you can pay the IRS directly. But since crypto taxes can be complicated, don’t be shy about reaching out to a professional for help.

 

 

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When it comes to lowering your crypto tax liability, many of the same strategies that are used against traditional investments, like stocks, apply to crypto holdings. Here are a few examples:

 

 

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The buy-and-hold strategy is simple: The longer an investor holds on to their crypto, the lower their potential tax bill when they do eventually exchange it for cash. If it was held for a year or longer, then long-term capital gains tax rates apply On the other hand, if the investor sells their crypto after holding it for less than a year, then short-term rates apply

 

 

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If a loss is realized on a crypto holding, it can be used to offset the gains made on other holdings. This is called “tax-loss harvesting,” and is a common tactic used to lower tax liabilities on other investments. Investors can use tax-loss harvesting to offset as much as $3,000 in non-investment income.

 

One thing to keep in mind, though, is that if crypto is somehow stolen or lost, investors are out of luck. They won’t be able to apply the loss against their gains to lower their liability.

 

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The IRS classifies crypto as property, and property donations are tax-deductible and not subject to capital gains taxes.

 

Here’s how this might work in an investor’s favor: If an investor bought a Bitcoin for $10,000 and it now has a value of $35,000, they would owe capital gains taxes on that $25,000 gain. By donating it, they can avoid those capital gains taxes and also take a deduction “generally equal to the fair market value of the virtual currency at the time of the donation if you have held the virtual currency for more than one year,” according to the IRS.

 

 

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Depending on the circumstances, crypto may be taxed as income, or as property.

 

Cryptocurrency taxes are very real, as are the consequences of ignoring tax liabilities. There are stiff penalties for people who are caught avoiding or otherwise failing to report investment income.

 

But by keeping track of your crypto holdings and transactions, managing your cryptocurrency tax liabilities shouldn’t be too difficult. As always, you can and should contact a professional if you feel like you’re in over your head.

 

Learn more:

This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.

 

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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