2018 has seen traders and investors alike face a situation that can be understood as the first wave of post-ICO projects. The hopeful visions of last year have given way to a reality requiring hard-nosed risk/reward assessment. To find value in such a crowded environment, the smart investor must have a method to filter out the noise. But how?
We can look at three points: price, team, and product. Only the latter two are directly tied to the project’s value while price is a lagging indicator. The smart investor is looking for divergence, where the price goes one way while real progress is being made by the company supporting the token.
When we look at a project’s team, we should ask if the project is hiring more staff despite challenges to the token’s price. We should explore all available sources of information to get a clear picture of not just how many hires there have been, but also the kind of positions. A healthy mix of C-level leaders, development teams, and marketing professionals is a very desirable distribution of growth.
I will keep examples limited for illustrative purposes only. One such is Freyrchain (FREC), a currently low-market cap startup building a blockchain-based authentication platform for collectibles and artwork. They are based in Shenzhen and founded in late 2017; a scan of their Twitter feed reveals the company recently expanded to a second office in Beijing that is fully focused on product and business development. For Chinese projects, invest extra energy in Weibo and Baidu searches while bringing trusty Google Translate along for the ride.
Looking closer at the team, we find the founder is Johnson Fung, a celebrity collector in mainland China. Notably, his organization’s staff doubled in the summer months from 20 full-time team members to more than 40 (May to July 2018), an expansion which can be attributed to the new branch opening in Beijing. A market cap of under 1 million suggests the company behind FREC token has potential for significant growth. This is the first kind of divergence we are looking for.
Product is the other key indicator. Look for tokens that have yet to capture the public’s imagination but are implemented in actual working products. Limiting your research to companies with actual products is a quick way to eliminate a large portion of the noise. Take the product for a test-drive yourself, looking for those that are leveraging blockchain technology in ways that make sense. Software is an iterative process so the sweet spot may actually be finding a product that is publicly available but also has major updates on the horizon.
Washington DC-based LOCI.io is a company with such a product (LOCIsearch.com). They have successfully implemented features with both blockchain and machine learning this year. In doing so, LOCI is gaining a reputation for delivering on their promises. LOCI launched their ERC20 token in February and by March their platform had achieved full blockchain integration. It’s worth noting LOCI’s IP Marketplace has yet to be released and is expected to be the cornerstone of their platform.
With a current market cap of just under $1 million, LOCI holders must be looking at the enormous market size of intellectual property ($329 billion in annual global IP revenue) services and also see the potential for growth.
In an environment filled with whitepaper print shops, it’s more important than ever to closely examine those things that matter across all industries. Expand your sources of information beyond your comfort zone. Check social media you don’t normally check. Directly contact teams with your questions and, when possible, seek feedback about projects from friends who have expertise in those industries. By digging beyond the surface, we can find the companies’ true stories and thrive.