The five signs of value in any cryptocurrency

“I DON’T really understand Bitcoin”.

These words came from a video I was watching, where world-famous Chinese entrepreneur and billionaire Jack Ma was taking questions from the crowd.

But the speaker was not a novice with a hand up in the audience, it was Mr Ma himself, best known as the founder and executive chairman of Alibaba Group; an e-commerce, retail, AI and technology conglomerate.

Mr Ma admitted he did not understand Bitcoin and how it could be valued. He also wanted people to know that it was OK to not understand Bitcoin.

“I’m not that big a fan of Bitcoin,” Mr Ma told the crowd. “But I pay special attention to the cashless society; the blockchain technology.

“Behind the Bitcoin, the technology is really powerful.”

Mr Ma said he dreamt of a cashless society, as it would help eradicate corruption and be more transparent. But he was no expert on Bitcoin and would not pretend to be.

It was the first time I had heard the admission.

While the price of Bitcoin has passed $14,000, many popular cryptocurrencies are far cheaper and can cost less than a dollar. But like Jack Ma with Bitcoin, the challenge is figuring out whether any of those prices are good value. And while this is just

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about impossible, a good way to start looking for value in a cryptocurrency is checking whether it ticks five key boxes, according to Canstar general manager, wealth, Josh Callaghan. The factors relate to the nature of the product, the brains behind it, the supply and demand, the market cap and the global online following. 1. Product “You want to find out if the function of the coin is unique; is it solving a particular problem or improving an existing service?” Mr Callaghan said. 2. Founding team “Most coins have a website which will detail the founding team. Look for teams with experience in crypto, setting up businesses or digital.” 3. Circulation of coins “Investigate how many coins are currently in market, how many more will be released and over what time frame. Fast release of new coins will dampen the potential price upside,” Mr Callaghan said. 4. Market cap“The investment world is grappling with some of the dizzying market caps that exist for these coins. You could use relative market cap – price times number of coins currently in circulation – to assess whether it’s overvalued.” 5. Online influence“Look for coins with large online influences and where there’s interest and activity on social sites such as Reddit and large followings on Twitter,” he said.