What Is Gems?
A Gem is a term used to describe a coin or token that hasn’t been discovered yet and has a low market cap with immense potential.
In crypto, a gem is used to describe an undiscovered coin or token with a low market cap and is grossly undervalued but can have tremendous potential either in the short term or long term. Gems, in most cases, are not easy to find, but when found, they could generate a lot of money for people. Gems in crypto could sometimes pump high, which means with a gem crypto you could earn 100× of your initial investment from just one cryptocurrency project. Common examples of crypto gems were Uniswap (UNI) tokens, which was airdropped to users before rising to over 45X, Polygon (MATIC), Shiba (SHIB), and Polkadot (DOT). Their respective valuation soared to record levels, heavily rewarding crypto adopters.
Discovering a gem with great potential could be tricky because there are no certain or precise attributes that make up a gem other than it will eventually rise high in value (pump). You could be holding a gem project, and you would not know you are. Since we can’t see the future… Yet, the only way we can recognize or discover a gem is when it pumps.
Gems are not easy to find, and there are several ways one could do research and find a gem project. However, a few criteria must be considered when looking for potential gems: their market cap, volume, supply, and fundamentals.
Generally, gems are coins or tokens that haven’t hit the spotlight yet. Because of that, they have low market capitalizations. Gems’ trading volume usually increases as time passes and more people begin to discover them.
Fundamental Analysis to Find Crypto Gems
One of the most critical aspects of gem finding is to conduct a fundamental analysis of the crypto markets. Fundamental analysis is an attempt by potential investors to determine the true value of an asset. It is done by making a careful analysis of all available public information about an asset to assess the possibility of finding crypto gems.
The basis of fundamental analysis to find gems crypto is based on the assumption that assets will shift towards their fair market value with time. Thus, if the results of the fundamental analysis show that the price is different from the current price, there is an opportunity for profit. A good fundamental analysis entails knowing what is gems crypto. In short, an investor has to know what qualities can indicate a crypto asset is undervalued. It also allows an investor to find overvalued assets and sell them before there is a price correction.
Finding crypto gems via fundamental analysis entails determining the likely price of an asset. There are numerous methods to do this, and most of them hinge on the supply and demand of the asset. In crypto trading, it is easy to estimate the circulating supply of an asset. One of the most commonly used models to determine the price in the crypto world is the stock-flow model.
A stock-flow model aims to predict the price based on the rate at which new coins are added to the network relative to the total supply. While the supply of the tokens themselves is predictable, macroeconomic events often have an impact on the crypto market. Investors need to focus on shifting sentiments amongst others investing in a coin. One way to measure sentiment is using the on-chain activity metric.
One good indicator of the rising demand for crypto, in general, is the global monetary policies. In general, as bases for fiat currencies increase, it is often a good sign the world is headed toward inflation. This could lead investors to conclude that interest in crypto will increase as a hedge against inflation.
On-chain volumes, the rate of address creation, network fees, and other data points are all publicly available, and useful for finding crypto gems. These numbers can show whether demand for a given coin is growing.
One of the most critical aspects of gem finding is fundamental analysis. Fundamental analysis is the act of analyzing a crypto project fundamentally. What you do in most cases when fundamentally analyzing is diving deep into the project, that is, reading the whitepapers, observing the community, checking the project price history, checking if the project is overvalued or undervalued, and so on.
Fundamental analysis, as I said, is the most crucial aspect of gem hunting. However, it could also be the hardest as well. You need to know the ins and outs of a project – the hidden value. This might require technical skills and experience in finance to search for value carefully. Some of the questions you should ask when doing fundamental analysis and research should be: “could this project be a game-changer?”, “How serious is the team behind this project?”, “Does this project have great utility?”
Bitcoin started as an undervalued low market cap coin that no one cared about when it came out. Just a few people saw it as a gem and those who did have been rewarded abundantly. The majority of the crypto projects out there today were once gems. Gem hunting might not be easy, but if you do your research and analysis well enough, you might find a gem project with immense potential.