The brutal bear market in bitcoin and altcoins has shaken everyone, including investors small and large. The crypto market has lost more than 70 percent of its valuations since the peak of November 2021. However, the drop in the price of some cryptocurrencies by a few cents does not mean a deposit. According to a famous analyst, although these prices seem like a very good discount, care should still be taken.
Lark Davis says altcoin investors should be careful
Crypto market analyst Lark Davis shares a list of cryptocurrencies that should not be bought in this bear market. It also conveys how investors can identify such coins on their own. Here are the details…
Altcoins that fail to reach all-time highs
Many of the top crypto projects hit all-time highs in 2017, breaking records in 2021. However, cryptocurrencies such as XRP and NEO could not take advantage of the bull run in 2021. Buying such altcoins during the bear market makes no sense during the current market crash. Davis adds that these altcoins had ample chance to prove their mettle during the last bull run, but failed.
What about XRP? As we have also reported as Kriptokoin.com, Ripple has been in a legal battle with the SEC since December 2020. The case is currently pending. Analysts expect it to result in favor of Ripple. In addition, XRP continues to be among the top ten cryptocurrencies despite all the negativities.
Altcoin projects without developer activity
Altcoins that stagnate in terms of developer activity receive a big “NO” according to Lark Davis. Some projects may have promised some surprising technological stuff. However, it may have failed to move the needle. Davis adds that there is no reason to believe in projects and their futures that have not shown tangible developer activity in the past six months. Such projects show a huge “red flag”. To track developer activity, Davis recommends a website called cryptomiso.com.
Social media interaction is also important
Davis recommends that investors follow the social aspects of crypto projects, especially Twitter, Discord, and Telegram. Do these projects adequately communicate to their target audiences about new developments? Are the followers engaging enough? Do these crypto projects form good partnerships with their peers in the industry? Investors should be cautious if the social connection is dead or dying, according to the analyst.
Analyst advises investors to research coin patterns
Davis says investors should do enough research on the coin model before investing in the crypto project. During the bull market, several scammers say the cryptocurrency has amassed 10x or more, attracting retail investors. Davis says there is no fundamental catalyst behind the rally of such coins, just “hype”. Such coins often witness massive crashes during bear markets that evaporate investors’ money. Only projects with strong fundamentals and coin models are likely to survive. Here are some of the key questions investors should ask:
- How does this coin make money?
- Does it offer any special dividends?
- Token burns, NFTs, etc. Does it have a strong economic model driven by
Davis adds that investors should avoid the false governance promises made by projects. He says that coins that have a good reason to exist will survive, while others may fail.
Altcoin projects facing liquidity problems
The collapse of the Terra ecosystem and the liquidity issues multiple companies are currently facing has been one of the biggest lessons. Therefore, Davis states that an investor should be willing to lose all his money if he is buying very high-risk altcoins in the market. Davis says it’s a big red flag, a red flag, if trading volumes are below six digits. In this case, investors may never exit these positions.
Davis says that even if the coin has a low market cap but higher trading volume, there may be something interesting about the project. Therefore, the liquidity factor is one of the most important things that investors should be mindful of when purchasing new altcoin projects.
Cryptocurrency markets are extremely volatile. Even the best looking coins can fail completely. For example, the Terra project, where more than $40 billion of investor money was destroyed. Davis says you never know what’s going on behind the scenes. Therefore, he recommends that investors should diversify their investments when investing in altcoins.
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