4 Things To Consider: Keys To Airdrop Investing

Airdrop investing has been a very active topic over the last few weeks. Everyone seems to have an opinion on how to play an airdrop, which airdrops and coins are going to perform the best and how to profit from airdrops. The idea is sound, receiving free coins that have value can in fact result in quick investment profits. Airdrops are unique to cryptocurrency and in theory, you could hold the prime coin just for the snapshot block, and have just minutes of exposure to the coins volatility. For your efforts of just holding a coin during the extremely brief snapshot block (around 10 minutes per block for Bitcoin for example) you will be rewarded with new, airdropped coins for free. This unique attribute should allow you to mitigate risk and achieve quick profits, executing on this and the reality of markets has an impact on this plan. Airdrops from new coins are an attractive investment option but before you invest in particular coins just for an upcoming airdrop, you should first consider these 4 elements.

The first thing to consider is the snapshot block and airdrop itself. Will the snapshot block and subsequent airdrop of free coins actually happen? This is important because if you are investing strictly for the airdrop, you are wasting time, money and effort in trading coins in order to position yourself to receive the airdropped coins. If the snapshot block and airdrop never happen, you will have no new coins, and you will have nothing but lost time and trading fees to show for it. Far worse would be a loss in your investment as the markets will likely respond badly to news of a cancelled or failed airdrop. Do your research when considering an airdrop investment, look into the technical capability of the team, the transparency of events and the overall likelihood that the team can deliver on their airdrop. If they it doesn’t look like they can pull off the airdrop, its a risk not worth taking.

The second key to airdrop investing is that not all coins are good investments. When it comes to airdrop investing this applies to both coins, the original coin (or prime coin) and the new coin that will be airdropped. Some airdrops are designed to abandon the original coin and start fresh with an airdropped, new coin. Sometimes the original coin is ditched by the market, even if that isn’t the intent. In these instances if you invest $1,000 for one prime coin which will be matched 1 for 1 with a new airdropped coin, and that original coin is killed off and goes to $0 per coin, the new coin must have a value of $1,000 just for you to break even. This is a dangerous proposition and defeats the purpose of making that specific airdrop investment. You need to research what the intent for both coins is post fork. You may need to read between the lines as well. With the example of Zclassic and Bitcoin Private, the team announced they would abandon Zclassic and continue on with Bitcoin Private. That was very telling evidence and predictably resulted in massive value drop of Zclassic immediately after the snapshot block occurred. It is very difficult to tell what might happen to a new coin once it is airdropped, so retaining value for the original coin on the original blockchain is an important first step. That way no matter what happens to the new coin, you have the initial value of the original coin intact. Bitcoin forks have shown to do this well. If you look at what happened to Zclassic after the snapshot block for Bitcoin Private, and then you look at what happened to Bitcoin after the snapshot block for Bitcoin Private, Bitcoin retained its value while Zclassic plummeted for an extreme loss of value. It should be noted the Bitcoin Private airdrop was part of a unique, co-fork where both Zclassic and Bitcoin holders received Bitcion Private airdropped coins.

The third element you should look for in the new coin is what the value of that new coin might be. How many coins will you get as an airdrop? How many coins will there be in existence ever? What is the airdrop ratio is it 1 to 1? How is the founding team compensated? You need to determine if the project looks like it’s any good. If the new coin has a future, that is a good sign, but if it looks like it’s just a scam coin then investing for the airdrop is not worth the risk. With enough research you can try to gauge what the new coins projected value might be, but those ranges are usually pretty wide. Use those estimates as one item to consider when you’re building an estimate of what you think the new coin will be worth.

Finally, when airdrop investing, you need to have a good idea of what liquidity will be like for the new coin. If your intent is to unload the newly airdropped coin and capture a quick profit, having a market to sell those coins is critical. There needs to be enough demand for people to want to purchase the coin from you. There also must be a way for you to sell the coin and that means the airdropped coin will need to be listed on multiple exchanges. If the airdropped coin is part of a good project, it should not be hard for the coin to get listed on several exchanges. This will help you when it comes time to sell your coin. The team behind the airdrop should have a plan to get the new coin listed on exchanges. Without liquidity, you will not be able to exit your airdrop investment if you need to, or if the time is right based on your investment strategy.

Not all airdrops are equal and there are many bad coins created everyday. You need to do your own research when it comes to airdrop investing. The better research you have on an airdrop investment, the easier it will be to decide whether or not you want to participate in the opportunity. There always seems to be another airdrop right around the corner, so do the work upfront to find the good ones. Research the project, look into the prime coin, dig into the team and their capabilities, look into how transparent the project and team are and compare their stated objectives against their timeline and goals. Good airdrop investments are lucrative, bad airdrop investing can cause investors big loses.

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