There have been a lot of worthless coins that left only bag holders behind. A bag holder is the last person to buy a coin before it becomes worthless.
1) Does the coin really solve a problem, or is it just hype?
There were some digital currencies before bitcoin which actually had functions, uses, but the current crop of coins is entirely profiteering. Fewer than 1% of the coins people are trading now will still exist in ten years. Celo is a coin that uses phone numbers as keys for its currency. A great idea that has propelled it to a few hundred million dollars. Any coin can copy that though. Ethereum let’s developers make money by building apps that run on it, but it mainly feeds pump crews while pretending that it has started something revolutionary. Numerai is a genuinely innovative coin with a narrow purpose, but again anybody can copy it.
Monetizing ideas which anybody can copy, as opposed to simply using the idea, lowers the bar ultimately in terms of quality. A coin today doesn’t have to produce anything, it doesn’t have to have an idea behind it which requires constant work. Somebody who knows how to code just spends a minute brainstorming then they will collect royalties as long as their coin lasts.
When real ai coins start, any coin will be copyable, but the value of the coin will be in the efficiency of the network. People who overmonetize trivial things, premine etc will be less efficient and quality will start.
2) Does the coin have its own blockchain, or is it piggybacking on another coin?
Anybody who knows a little coding right now can spend 10 minutes thinking up an idea for a coin, 20 minutes attaching it to an already built coin, and then they can make millions quickly if they get some good marketers and a pump crew. Many of the $10 million + coins that exist now were created in a short while with most of the planning on how to pump it.
3) Coinmarketcap and some other sites lists how many people are following a coin.
Most large cap coins have 100,000 +. If a coin has a large market cap but few followers it’s market may be tightly controlled/fake. Some developers control the trading in their coin and make it look like lots of people are trading when actually it is only speculator’s bots and the pump crew.
4) Distribution is the key metric most people use to decide what a coin is worth.
Some scamcoins will airdrop coins to a lot of users to inflate that metric. Ripple was the first big success using that technique. They had no real idea behind their coin, no value, nothing but empty slogans, but they got hundreds of thousands of people to look like they used the coin because Ripple gave those people free coins, which the people sold to speculators once they could.
5) Nodes is a very important metric.
Explorers at some sites like Cryptoid show the number of nodes, i.e., the number of computers running the wallet, and what countries they are in. A coin with a $500 million market cap that only has a hundred nodes is questionable. Coin.dance shows a comparison between three versions of bitcoin, and the low number of nodes as of early 2021 shows that digital currencies are mainly for speculation, pumping.
6) Transactions are also an important metric.
Unfortunately scammers use bots and other methods to inflate the number of transactions, so a coin looks like a lot of people are using it when nobody really is. BSV is probably the most extreme example of this scam.
7) Aggressive, well funded pump crews are a warning sign, but also an opportunity if you are just looking to make money.
Monero and BSV are the big scammy success stories of a wealthy hidden patron hiring massive amounts of people to convince others that their coin is amazing. When you try to make money with these coins you have to be careful. You have to gauge the amount of money the benefactor is willing to spend on the coin before it gets trashed, and the skill of the pump crew will tell you a lot. BSV and Monero had professionals that a person would normally associate with large corporate or government operations, but most coins are pumped from somebody’s basement between reruns of cartoons.
There are lots of good coins that could be made, Unfortunately, all of the coins that exist so far are trash. They can be good for making money though, as long as you get out of the scammy coins in time.
Are you part of the scam if you make money on scamcoins? If a scam coin crew is selling a coin at $1 and you sell it at 0.75 cents you are temporarily helping long term bag holders save a little money. If you got in early enough your profits are taken from what the pump crew would have gotten. You aren’t actually costing anybody any additional money, as long as you do research and don’t pump garbage coins.