How to Evaluate Cryptocuyrrencies in this information Jungle

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I just read this post by @ivonne. The post is in German, but basically she has been informing herself about cryptocurrencies for two months now, yet it all feels like a jungle to her. So the question is: how do we know what to go after in this hunt for profits .

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I chose to use this picture of a lion I took in the Masai Mara in Kenya because she is currently looking at her prey trying to figure out how to make a kill.

Every step she takes and decision she is making is key for success. As an investor I feel the same way about the cryptocurrency market. So let me tell you some of the thoughts I have.

Ivonne is asking two very good questions:

Do we need to evaluate cryptocurrency differently
What are the criteria of evaluation
Keep it simple
To me live is always simple and having a very basic model and framework is always very important to be able to navigate successfully. As such there are only two things that are relevant to me on the highest level when making investment decisions:

What is giving this project/coin/blockchain value
Price action: What do the charts look like and in what kind of market are we at the moment
If I cannot figure out what gives anything value or where this value is coming from then I have either not made my homework correctly, or I have mis-judged the opportunity or the thing should not be invested in because it probably does not have value.

Even if a project is amazing I do not want to enter into a position if it is at the top of a bubble. When a coin crashes 90% after I buy it will be hard for me to make winning investments. Instead I should pick it up after such dips and then profits should come much easier. Likewise the market as a whole is often in a bull or bear market and such should be taken into account before entering positions.

When we listen on TV to experts and their opinion about crypto we often hear one camp advocating for the "groundbreaking technology" and the other side calling it "just another bubble".

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The thing is to understand that not one or the other is not automatically right and wrong, but that both may be right. In such a case it would be crucial to invest at the right time.

We need new metrics
Sorry but there is not automatically a profit, cashflow, P/E ratio etc. that you can use to figure out if the price is right. If this was an easy market everyone would be in it and you would not be able to get 100x returns within one year (i.e. like ETH went from $8 to over $1400 in about one year).

These metrics may not exist so that you have to invent them or sometimes even metrics may not tell the whole story. Think about Apple in 2007, when the iPhone was invented. If you were really smart you could have realized that this would change the entire phone market and change what the internet will be. However there is not really a math formula that you use to come to such conclusion. You must use your intelligence and experience. That neural network inside your head.

Respect the nature of this technology and limitations of your brain
The truth is that such revolutionary technologies don't come around that often. I personally believe that blockchains are a new invention of organization that allow us to be production in a entirely new context. Such happens very very rarely and as a result we are not adapted to deal with it.

As a result many wall street analysis and TV personalities look at the bitcoin charts and apply their standard analysis patterns to it. That will work in many ways but misses the big picture at the same time. We are adapted to see everything in patterns and reference everything with anything. That is how our brain works. And in nature this works well because it adapts over millions of years and usually does not change very much.

In other words naturally we are not very adapted to dealing with things we don't know. At the same time we as a species are the one that has learned to adapt the most. We need to use those skills to change our frame of reference as agile as possible to quickly learn what this is and how it works. For this we need to be very open minded because the connections will not be apparent to us, because we have never seen and drawn them.

So while keeping the soft factors in mind here are some metrics I like to use:

The Mayer Multiple
Transaction volume
Chatter such as messenger group activity, forum users, and twitter activity
Transaction volume (relative within)
Growth (relative within)
[NVT Signal ] (http://woobull.com/nvt-signal-a-new-trading-indicator-to-pick-tops-and-bottoms/)