Altcoin Investment Guide: Which Key Metrics Are Worth Paying Attention to?

Author: thedefinvestor

Compiled by: Vernacular Blockchain

The bull market is back (at least for now).

But the question is, which altcoins are most likely to become the top performers?

During the bull run of 2021, almost every random coin was surging. However, things have changed since then.

With millions of new altcoins being launched, it’s now crucial to choose the coins you buy in order to make money.

In this post, I want to share my cryptocurrency investment checklist and the key points I look for in a project.

1. Narrative fit with the market and high attention

Think about the best performing tokens of the past 12 months.

Some examples include HYPE, VIRTUAL, and MeMe.

Do they all have strong fundamentals? Some coins like HYPE do, but the vast majority of the top performers listed below clearly do not.

 Source: Coingecko's article on the biggest cryptocurrency gains in 2024

But they all have one thing in common: a high social media following and a community of fervent believers who constantly promote these coins on the X platform.

Furthermore, most of the top performing coins are associated with a strong narrative:

• VIRTUAL: Prices skyrocket as AI narrative takes off
• MeMe: Surge in Q4 2024 and early Q1 2025 when meme trends are hot

My advice is this: find a narrative that’s currently trending, and then look for tokens related to that narrative that have the most active X community.

2. Growth indicators

While attention (unfortunately) is far more important than fundamentals in a bull market, the good news is that there are projects that have both high attention and product-market fit (PMF).

If you can find a project that has both of these characteristics, it could be a good investment opportunity, especially if its product has recently shown explosive growth in various metrics.

For example, the stablecoin protocol Ethena has seen a 50% increase in total value locked (TVL) over the past 30 days. Meanwhile, it has also seen a lot of discussion on the X platform.

The result? Ethena’s token, $ENA, is up 154% over the past month.

You can make a lot of money by identifying projects early that are showing growth in metrics (such as TVL/revenue/expense growth) and have good platform attention.

The main tool I use to discover the fastest growing projects is DeFiLlama.

3. Reasonable Token Economics

If you plan to buy a token and hold it for only a few days, token economics is not that important. But for medium- to long-term investments, the situation is completely different.

For example, TIA has fallen by more than 90% over the past 17 months as the price has declined due to the huge selling pressure from early investors after each token unlocking.

Therefore, it is very important to review the token economics before purchasing a token.

When I research tokens, I focus on the following:

Token to be unlocked

You can use Tokenomist to check the token economics and upcoming unlocks for many popular tokens.

Generally speaking, I would like the circulating supply to be at least 30% of the total supply, and the annual token issuance (i.e. inflation rate) to be between 20-35% at most.

In addition, if there is a large-scale token unlocking in the near future (for example, unlocking equivalent to more than 20% of the current circulating supply), I will choose not to purchase the token.

Token Utility

I always ask myself two questions:

• Will the token I want to buy benefit from the success of the protocol?
• Why would someone buy it for more than me?

Revenue sharing mechanism or token repurchase is what I think is the best token utility.

That being said, while strong token utility is a big plus, it is not essential. I have seen many tokens with little to no utility that still perform very well.

4. Community-centered philosophy

It’s more important than ever that projects are community-focused.

More and more people are no longer willing to invest in bland, faceless brands—they want to support teams that truly care about their communities.

This is one of the reasons why I think tokens like HYPE and PENGU have performed so well recently.

A few signs that a crypto project is community-centric:

• Conducted a large-scale airdrop
• The team always keeps a low profile and over-delivers
• Team-led marketing — The team is very active on the X platform and frequently interacts with the community
• Most of the token supply is allocated to the community

These are the main factors I look for in a token.

Another important factor that could drive up token prices is an upcoming major catalyst that has not yet been priced in by the market.

This could include protocol upgrades, token economics improvements, or new product launches, all of which could significantly increase a project’s revenue.

Summarize

Still, remember this: a good asset can still be a bad investment if it's not priced right.

Wait for the right opportunity and don't act impulsively due to FOMO.