Cryptocurrency bear markets destroy portfolio value and they have a dangerous tendency to drag on for longer than anyone expects. Fortunately, one of the silver linings of a market-wide pullbacks is that it gives investors time to re-focus and spend time researching projects that could thrive when the trend turns bullish again.
Here’s a five areas to focus on when deciding whether to invest in a crypto project during a bear market.
Is there a use case?
The cryptocurrency sector has no shortage of flashy promises and gimmicky protocols, but when it comes down to it there are only a handful of projects that have delivered a product which has demand and utility.
When it comes down to determining if a token should continue to be held, one of the main questions to ask is “Why does this project exist?”
If there is not a simple answer to that question or the solutions offered by the protocol don’t really solve a pressing problem, there is a good chance it won’t gain the adoption it needs long term to survive.
Identify a competitive advantage
In the cases where a viable use case is present, it’s important to consider how the protocol compares against other projects that offer solutions to the same problem.
Does it offer a better or simple solution than its competitors, or is it more of a redundant protocol that doesn’t really bring anything new to the table?
A good example of unnecessary redundancy is the oracle sector of the market, which has seen a handful of protocols launched over the past three years. Despite the growing number of options, the oldest and most widely integrated oracle solution Chainlink (LINK) and it remains the strongest competitor in the field.
Does the protocol generate revenue, and how?
“If you build it, they will come,” is a cliche expression tossed around in tech circles, but it doesn’t always translate into real-world adoption in the cryptocurrency sector.
Operating a blockchain protocol takes time and money, meaning that only…
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