Daily Briefing: Looking for Outliers
Identifying outliers is a tricky business, but it's a skill that anyone can cultivate.
- Outliers can be a solid bet in the crypto space, but they can take time to identify.
- Fortunately, simple data collection doesn't take much technical skill and can still yield results.
- With as little as a pen and paper, diligent users can generate their own alpha by paying consistent attention and charting comparative performance over time.
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Outliers can be among the most hotly sought-after projects in the crypto space, but spotting them takes time, effort, and a little bit of luck.
Diamonds in the Rough
Today I want to share a simple but surprisingly effective way to identify the crypto projects you should be paying attention to. You won’t need any fancy software or advanced analytics—just your favorite coin chart website and a pen and paper (or excel spreadsheet if you prefer). Ready? Let’s go.
We’ll be looking for outliers—crypto tokens with a consistent track record of outperforming when the market is bullish and showing strength when things are bearish. A good way to search is by scrolling through a coin chart website like CoinGecko or CoinMarketCap that lists tokens and their one-hour, 24-hour, and seven-day performances.
If it’s a green day, look for the tokens that have gained more than others and note them along with the date. Conversely, if everything’s red, find that projects that have declined less compared to their competitors. For example, if you’re looking at Layer 1 chains, comparing a project’s price action to Solana, Avalanche, and Ethereum might be appropriate.
The idea here is to spot the tokens that are consistently catching a bid regardless of the market conditions. It’s no secret that the majority of the crypto market moves in step with Bitcoin, but within the King’s price fluctuations, other tokens often outperform it. I recommend taking notes on outliers for at least a week to get a minimum viable amount of data. However, the longer you keep up your observations, the more reliable the data set will become.
Once you’ve identified a handful of outperformers, the next step is to try to figure out why the market is bullish on them. This can be tricky—it requires time and thorough research to ensure you’re not overlooking anything.
Of course, it wouldn’t be very good if I told you to look for outliers without sharing a few I’ve found myself. Using this method has helped me identify several large and small projects that the market has consistently bid on in recent months.
The first and perhaps most obvious is BNB chain. It can be easy to overlook the number three crypto, especially if you don’t use the Binance exchange, but since the start of crypto winter, BNB has consistently outperformed its peers.
Reasons for why BNB has outperformed vary depending on whom you ask. But in my opinion, it’s a combination of top-tier marketing to Binance exchange users, consistent demand as the gas token on BNB chain, and the network’s place as one of only a handful of crypto projects that generates a significant amount of revenue.
Other outperformers I’ve noticed include the Ethereum Name Service’s ENS token, Arbitrum’s GMX exchange token, and Quant Network’s QNT. I can’t go too in-depth on all these projects today, but if you’re interested in learning more, you can always catch me in the SIMETRI Discord server for a chat.
Disclosure: At the time of writing, the author of this piece owned ETH, BTC, SOL, and several other cryptocurrencies. The information contained in this article is for educational purposes only and should not be considered investment advice