- Bitget and Nansen have published a report on how to discover the best new tokens.
- What seems most useful are various community engagement metrics.
- New tokens and existing tokens have different metrics applied to them.
With thousands of tokens being released every day, traders are always looking for ways to find the few with the greatest potential. Those who can do so can make millions of dollars in the lucrative altcoin market.
Most recently, cryptocurrency exchange Bitget and blockchain analytics firm Nansen released a report that provided insight into this process. The purpose was to help Bitget choose which tokens to list for its users, but the conclusions are very useful for traders.
Bitget Unveils Initial Token Selection Strategy
Picking the most promising tokens from thousands of tokens is a challenge for traders. On Monday, July 29, Bitget, in collaboration with Nansen, announced a method to pick the most likely winning tokens.
Cryptocurrency exchanges face similar challenges when deciding which tokens to list to ensure users have access to the best tokens. Since April 2024, Bitget has listed over 180 tokens, many of which are too early to have reliable on-chain metrics. This means they rely primarily on off-chain metrics such as community strength, technological innovation, and token economics.
The criteria include a minimum of 4,000 airdrop participants, a trading volume of $1 million in circulating tokens, and a minimum of 30 trades per hour. The exchange also looks at community strength, requiring projects to have at least 10,000 followers on Twitter and 5,000 active members on Discord or Telegram.
Exchanges also look at token economics. The fully diluted value (FDV) of new tokens must not exceed 20x the amount of funding raised. They also look at investor reputation and token unlock schedules.
These criteria provide valuable insights to traders, as they can use similar criteria to analyze early-stage tokens. For more late-stage tokens, Nansen has released an analysis in the report.
Nansen looks at existing tokens and reveals key metrics
Nansen uses several basic on-chain metrics to understand the economic activity and potential of blockchains and their associated tokens. However, their results are not consistent across all tokens.
There has been a significant correlation between on-chain metrics (such as TVL and fees) and token prices on Ethereum and Layer 2 scaling chains. As TVL and fees increase, token prices tend to increase, such as ETH, MATIC (Polygon).
Solana and Avalanche showed some correlation with certain metrics, but the relationship was less consistent. Chains like Fantom, Celo, and Tron did not show strong correlations between on-chain metrics and token prices.
On the other side
- Social sentiment was correlated with weekly token price movements, but was not as important in predicting future prices as on-chain metrics like TVL and fees.
- Valuing early-stage tokens can be difficult due to limited on-chain data, requiring reliance on off-chain metrics and a thorough evaluation of community strength and market traction.
Why this matters
Understanding the methodologies and criteria used by exchanges like Bitget and analytical platforms like Nansen is very important for traders and investors. This knowledge will help you make better decisions.
Learn more about Nansen’s analytical work.
Nansen Reveals $650 Million Ether Stake in DBS Bank
Learn more about what BlackRock thinks about altcoin ETFs:
Solana, Will XRP ETF Become a Reality? BlackRock Lowers Expectations