I’ve been banging the drum on crypto lately—from recent regulatory wins in Washington to the different ways tokenization is about to reshape financial markets.

If you missed my last two crypto columns, you can catch up here and here.

But let’s back up a bit…

Because none of that matters if you don’t understand the fundamentals of what you’re buying.

Today, I’ll explain the ways the crypto market resembles the stock market… and walk you through identifying crypto projects with the potential to make big returns.

Let’s get started.

• There are “majors”… and there are “minors.”

You’ve probably heard the term “blue chip” stocks.

These are big, stable companies like Apple (AAPL), Amazon (AMZN), and Nvidia (NVDA). They’re not always the fastest growers… but they’re safe.

Unlike mid- and small-cap stocks, blue chips are considered dependable assets for investors who want to steadily grow their wealth.

Meanwhile, “growth stocks” are generally smaller or lesser-known companies that—as their name implies—tend to grow at a faster rate than blue chips.

While their returns can be bigger, these stocks are inherently riskier due to their faster price swings.

The crypto market works similarly. It can be broken down into crypto “majors” and crypto “minors.”

“The majors” are cryptos like bitcoin (BTC), Ethereum (ETH), and Solana (SOL). These are the biggest, “safest” cryptos on the market. Institutions can buy them either through ETFs or reputable exchanges like Coinbase (COIN).

“The minors” represent all other coins, with a few exceptions. They’re smaller, more speculative, and have fewer investors. It’s also harder for institutional investors to buy into them because they don’t trade on easy-to-navigate exchanges.

Thing is, some of these smaller cryptos represent real businesses making real money. Many of them are DeFi projects with great fundamentals. And I expect them to hand early investors the highest returns over the coming decade.

I bring this up because it’s important to know what you’re buying into… and to set realistic expectations.

Investing in the crypto “majors” is like holding blue-chip stocks: Consider these longer-term positions that should steadily grow over time.

Investing in the crypto “minors” is like holding growth stocks: They may be shorter-term plays that whipsaw in price. But if you have the conviction to hold during down times, they could also be the most rewarding.

• Tokenomics are what make or break a crypto…

I often say that “tokenomics” is one of the most important—if not the most important—drivers of a crypto’s price.

Think of each crypto project as its own little economy. A crypto’s token economics defines how money (tokens) is distributed and earned in its economy.

It lays out the rules for how:

• Many tokens are in circulation

• New tokens are created

• Old tokens are destroyed

• Tokens are distributed to various participants

• The token is used

• The token accrues value from the underlying crypto business

• Crypto incentives are used

A good example of this is bitcoin, whose tokenomics state there will only ever be 21 million bitcoins created.

It’s important to note that crypto projects can have wildly different tokenomics. There isn’t a one-size-fits-all approach. And a token’s tokenomics can make or break a crypto.

I favor cryptos with solid tokenomics. In other words, tokens that somehow accrue value from the underlying business. This is what gives crypto tokens value.

• The best cryptos are just great businesses in disguise.

Warren Buffett once said, “Cryptocurrencies have no value, and they don’t produce anything. They just sit there. You can stare at it all day and no little bitcoins come out.”

Buffett made his fortune investing in productive, cash-generating businesses. He owns insurance giant GEICO, which rakes in billions of dollars in sales each year.

As Buffett said, bitcoin doesn’t produce anything. This is true of cryptocurrencies.

But most cryptos aren’t cryptocurrencies.

Dozens of real crypto businesses produce millions of dollars in cash flows each day. That means we can determine their value like we would a stock.

For example, you can compare how much revenue Ethereum rakes in each year to its market cap to get an idea of how “expensive” or “cheap” it is—just like a stock.

I use this mentality (and encourage you to do the same) when evaluating crypto opportunities.

The key is to identify great crypto businesses early on and then hold them as they flourish.

Why?

I’ve chatted with lots of people who have achieved big riches in crypto. They all have one thing in common: conviction.

Their conviction allowed them to hold cryptos they believed in through the big ups and downs that are unavoidable in this market.

To that end, here are some basic questions I ask myself when evaluating a crypto:

• Who are the key people involved?

• What does the company actually do?

• What important problem is it solving?

• How much money is it making?

• How fast is the business growing?

• What advantage does it have over competitors?

• What are the tokenomics?

Thinking of cryptos like a business will also help you to avoid the bad ones…

Personally, I wouldn’t touch 90%+ of cryptos out there. Most will go to zero.

This isn’t much different than the stock market. There are roughly 6,000 companies listed on US markets. 5,950 of them are uninvestable.

It’s also worth mentioning that crypto is unique in that it has real-time financial reporting. There’s no “earnings season” in crypto. Blockchain allows us to see everything in real time.

We can see how much money a business made today… or how many users were on its platform. It’s like getting a daily earnings release.

This helps to pinpoint fast-growing projects early and invest in them.

• Want to learn more and stay ahead of the biggest crypto trends?

Crypto can feel chaotic when you’re just getting started.

But underneath the noise, the best crypto projects behave like the best businesses: they solve real-world problems, generate real revenue, and reward long-term conviction.

That’s where the biggest opportunities lie.

If you’re serious about navigating this growing corner of the market, I regularly write about crypto in my free disruption-focused letter, The Jolt.

From real-world use cases… to promising crypto protocols… to the changing regulatory environment—I cover it all. But crypto is just one major disruption I wrote about. I also share the latest in artificial intelligence, chips, biotech, nuclear, and much more.

If that sounds like something you want to learn more about, join us here today. I send new issues out twice weekly.

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Stephen McBride is Chief Analyst, RiskHedge. To get more ideas like this sent straight to your inbox every Monday and Friday, make sure to sign up for The Jolt, a free investment letter focused on profiting from disruption.