DYOR: A step-by-step guide on finding low-cap coins with 5–100x potential ↓
Step 1: @DefiLlama
Use DeFiLlama to create a shortlist of tokens that fall below a specific market cap threshold and pre-analyze their core fundamentals:
• Category
• Total Value Locked (TVL) and its trends
• Revenue and fees
• Trading volume
• Price-to-Sales (P/S) ratio
Step 2: @tokenterminal
Token Terminal is my go-to destination for more in-depth fundamentals research.
Note that for lower-cap assets, Token Terminal data might be limited and in this case, it's worth checking @DuneAnalytics dashboards or native protocol analytics.
Step 3: Competitive analysis
Once you have created a shortlist of protocols, group them by narratives and compare their fundamentals to determine the leaders in each category.
DefiLlama, TokenTerminal, and Dune will once again be helpful.
When dealing with a well-established category like Derivatives or Lending, it's important to compare your protocol against the industry leaders.
For example, let's say the top three protocols in a certain category have a market cap to TVL ratio of 1/10. This ratio becomes the benchmark for the sector.
Now, you can compare your target protocol against this benchmark to define the relatively fair marketcap.
Step 4: In-depth analysis
For many protocols, a customized approach is necessary to assess their growth potential.
Analyze the unique selling proposition, roadmap, and upcoming releases to determine if more hype is building.
Step 5: Social hype → @TweetScout_io
Analyze the trend in social interest formation and compare the performance of competitors in the social feed.
Give special attention to influencers and VCs who are following a specific brand.
Step 6: Finding a good entry
This step will require some very basic technical analysis to avoid buying at the top. I usually use @dexscreener for this purpose, as I also maintain my watchlists for future entries there.
But you can use any other chart analysis tool you love.
That's it!
Analyzing the protocols within this framework is both fast and efficient. It covers the basics of making sound investment decisions.
Enjoy your research!