Finding Value When Value Is Lost – Five Key Points

A Skewed Reality

Humans are inherently uncomfortable with uncertainty. Unfortunately, this is the only path one can travel when it comes to investments, especially Crypto. Observing the Crypto market after the carnage of a full-blown bear market is somewhat similar to looking out across a plain that has just endured a raging fire. Much is destroyed, the trees are now ashes on the ground, and the image before you reminds you of an artwork executed in charcoal.

Everything appears to be destroyed. There are no tones of green that would usually represent life and growth. On the contrary, everything is black. However, in time, and especially with the rain, the green shoots begin to rise above the surface. Not everything is destroyed beyond recovery, and it is fairly similar within the world of Cryptocurrencies. The damage that is absorbed during a typical “Crypto Winter” is severe, but not fatal.

There will however be those projects that get caught up in the “heat of the fire” and will never really recover. However, many good projects will simply utilize the fire as a pruning experience and simply go on to be more fruitful and productive. Development and productivity are two essential metrics that one should always refer to in order to discern the health of any Crypto project. Stagnation is a no-no! Even if the “price” is suffering, growth in other areas speaks volumes.

It All Looks The Same

In many cases, the casualties of a bear market all look rather similar, as altcoins in general usually go on to shed at least 90%. This is the reality even in the case of more established and solid projects. Everything gets cut down, the only difference is, which ones rise again. This is where the search for value begins. Identifying value is still very much an effective practice that has been promoted by Graham and Buffet for decades.

It’s actually not that the value is lost, but rather that the current pricing does not correspond with the inherent value of a particular project. However, there are those projects that are still overvalued after a bear market, due to the case that they have been abandoned and will never amount to anything. This is where effective discernment plays a large role and is accompanied by research and the digesting of data.

Five Key Points

There are five critical points that I always consider when seeking out “hidden value”

  • The project is still relevant & well-positioned for the future
  • There has been ongoing development
  • There is still an active community and core user base
  • The project has significant upside potential in relation to fair market value
  • Additional residual or passive income potential

The first point addresses “relevance” and future “trends”. For instance, considering that the SEC and other regulatory bodies are clamping down so hard on altcoins makes me think that fair launch Cryptocurrencies will eventually be “hot property”. One could also consider AI plays and other projects that still provide value to society via meeting a need or fulfilling a specific purpose.

Development is always a good point to focus on, as development and growth usually tend to get priced in at some point. This is generally unable to take place in a bear market. How can an asset appreciate definitively, while the entire market is collapsing? What often tends to happen in a bear market are sudden bursts that later taper off. Ultimately, true pricing in of development and growth will only take place in a bullish market.

Thirdly, many coins are kept alive via a dedicated community. Look at Doge for instance, prior to the “Elon effect” of 2021. There was a strong sense of conviction and dedication to the project from the community. Doge has always had an extremely passionate community, which is rather fascinating considering Jackson Palmer abandoned the project many years ago. It just shows how important and powerful a community can actually be in a project’s journey.

The fourth point can also be rather important, especially if the project in question was considered to be previously overvalued. This was my opinion of Cardano in 2021, which is why I avoided it during that particular period. However, when you consider all of the development during the bear market, and that ADA is still below $0.40, it’s a different scenario. Had ADA only corrected to say $1.20 as opposed to $0.30, I would be of a different opinion.

The final point is very important, as additional “income” can be reinvested, which brings about another form of appreciation outside of price appreciation. In other words, your investment grows without additional allocation or price appreciation. HIVE is a great example of this particular dynamic, and if heavily oversold, makes for a great investment opportunity, in my opinion.

Final Thoughts

Well, those are the five points that I consider rather crucial in my decision-making process. obviously, there are additional points that one can consider and observe, but I have found that much is covered by paying attention to these particular points. All the best, as you go about preparing for the next bull market. See you next time!

Leave a Reply

%d bloggers like this: