Warren Buffett Tips Applied to Cryptocurrencies and ICO’s - How to Pick an Altcoin or ICO to Invest

How do you go about buying and investing into the perfect coin or coins and can Warren Buffett’s way of stock investing be applied to cryptocurrencies and/or ICO’s?

Below are some steps to take along with comparable advice Warren Buffet takes when evaluating and buying stocks.

1. Familiarize yourself with the market by using CoinMarketCap.com to understand the many coins and their purpose. The worst thing you can do is put your money into something you don’t know about or understand. Use CoinMarketCap.com as a starting point to find the top coins in market capitalization and volume then use the below steps to further your research.

2. Find a cryptocurrency that has promising hope of improving their technology or mission in the future. If the coin’s mission and technology can grow, it will likely be recognized and promoted. To do this, go to their website and read about their purpose, management and development team, and progress of their project.

• Comparing this to how Warren Buffett invests in stocks, he first thinks about the business and whether he can approximately estimate its key economic characteristics (profitability) 5 years out. If the answer is ‘no’, he passes.

• Buffett has said that the perfect business has the following characteristics:

1. It has a competitive advantage

2. Large opportunities to reinvest additional capital

3. High rates of return on incremental capital

• Although points 2 and 3 above can’t directly be applied to crypto, we can use his advice more broadly in that he looks for a competitive advantage and if that company/stock has additional capital opportunities to grow. Such as is a new ICO or coin getting backed by a Fortune 500 company or another big firm. Buffett also looks for a management team that is competent and aligned. He wants people who love the business and like the money, not people who just love the money. This is especially important when evaluating ICO’s.

1. Check forums and/or chat sites dedicated to the project. They will give you realtime and in most cases unbiased insight into the coin’s progression. If you only find forums and threads about trading rather than what the coin’s team is doing, its most likely only being used for making money and not future real life problem solving purposes. Remember Buffett heavily investigates competitive advantage and if you are not seeing unique traits of a coin it may be wise to look elsewhere.

Having done all of the above, valuing businesses or in this case, cryptocurrencies, isn’t that hard. The hard part is choosing the right ones to attempt to value in the first place and getting the key profitability variables approximately right. All Buffett is attempting to do in his stock picks is trying to make sure that the business is very likely worth far more than the price being asked, and that it is very unlikely that it is worth significantly less. Think about that when investing in an ICO or coin for the first time.

To end, if I had to give you one tip on how to choose a coin to invest in long term (besides the top 3 of BTC/ETH/LTC), I would say choose proven development with a competitive edge that has community backing and not just marketing hype.