What is a Hidden Gem? Evaluation Methods
1. What is a Hidden Gem?
A hidden gem refers to projects, tokens, or coins that are expected to grow in the future but are currently undervalued and not widely known. Investors typically look for hidden gems based on factors such as the project team, tokenomics, and investment funds involved. On-chain data and insider news can also help identify these projects.
However, investing in hidden gems comes with risks, such as low liquidity or the potential abandonment of the project by its team. Thus, thorough research and effective risk management are crucial. For example, projects like Tensorians and Hedera were once considered hidden gems but have since grown significantly and are no longer in that category.
2. Criteria for Evaluating Hidden Gem Projects
To determine whether a project is a hidden gem, consider the following factors:
- Project Team: The team behind the project should be professional and dedicated to its development. While the team members may not be prominent figures in the crypto space, they must have the ability to execute and grow the project.
- TVL (Total Value Locked): TVL measures the amount of money users have locked into the project. A higher TVL indicates greater trust and usage of the project. A minimum TVL of $1 million is a good benchmark for a hidden gem.
- Trading Volume and Liquidity: While a hidden gem may not be widely known, the project must maintain a stable and adequate trading volume and liquidity to attract new participants. If liquidity is low, investors should evaluate other factors, such as the team and investor involvement.
- Tokenomics: This is a critical factor to assess, as it involves the distribution schedule and allocation of tokens to investors. A good tokenomics plan motivates the team and investors to remain committed to the project's long-term success.
- Market Sentiment: Evaluating the flow of capital into the crypto market is essential. The capital flow into a specific project plays a significant role in its growth potential.
3. Tools to Find Hidden Gem Projects
To search for hidden gems, the following tools can be incredibly useful:
- X (formerly Twitter): X is a key social media platform for tracking crypto founders and key opinion leaders (KOLs). For example, Arthur Hayes (co-founder of BitMEX) and Vitalik Buterin (creator of Ethereum) are influential figures in the crypto market.
- DefiLlama: This website aggregates data such as TVL and trading volume for various projects. It allows users to track the development of projects over time.
- Discord: Discord is where the community of a project can interact directly with the founders and team. A positive, engaged community often indicates a project with potential.
To truly identify a hidden gem, users should combine multiple factors such as capital flow, community engagement, tokenomics, and technological breakthroughs.