Cryptocurrency is one of the riskiest and also the most profitable trading activities one can be involved in. So, it’s wise to do your diligence before investing in any new altcoin or cryptocurrency.
Before you decide to buy a cryptocurrency, it’s important to know all about the coin, the background, the project concept, demand, etc., the team and other things to be able to assess the returns on your investment. This can only be achieved through proper research of the crypto project.
Not sure how to do that? Here’s a brief guide to researching a cryptocurrency.
Through your research of the cryptocurrency, the aim is to find answers to the following questions:
- What’s the cryptocurrency all about?
- What problem does it solve?
- What are the use cases for the currency/product?
- Is the problem big enough? Is there an actual demand for the solution?
- Can the problem be solved with the suggested method?
- Are there other projects working to find a solution to the same problem?
- What is the use of blockchain?
- Can the problem be solved without a blockchain?
- Is there a project whitepaper? How thorough is it?
- What’s the type of altcoin – utility token, security token or stability token?
- How will the currency gain value over time? How does it benefit you as an investor?
- What do you know about the team?
- What is the circulating supply?
- Is the coin PoS based or PoW or hybrid?
So, once you have answers to all these questions, you can better assess the project and the coin for long term value.
How to Research
Now, that’s the important part.
Following are the three best resources to find information about a cryptocurrency:
- Project website
- Community sites like bitcointalk.org
- Coin listing sites (directories) such as coinmarketcap.com
Project Website & Whitepaper
Of course, the first approach should be to try and collect as much information about the project or coin as possible. And what’s the best place to start than the official project website and whitepaper?
A good project website & whitepaper will have all the information, including the project description, token details, purpose, structure, team details, technology & specifications, roadmap, wallet/DApp, etc. that you may need to know in order to make an investment decision.
Here, you can also find details about whether the token is PoW or PoS or anything else, and how it is mined (pre-mined, staking, etc.). Cryptocurrencies like Titan coin with a hybrid consensus mechanism are kind of popular these days, as the security is higher and the cost is low.
BitcoinTalk is a leading forum (community) platform to talk about all things related to cryptocurrencies. If the project or coin is real, it will definitely have threads or mentions on this forum.
Coin Listing Directories
There are a number of coin listing sites where you can probably find details about a cryptocurrency or project. CoinMarketCap, which is the most popular of all coin listing sites, can give you information about the token age, price, trends, market cap and other details.
Besides the above sources, you can also find out a lot about a crypto project or ICO from its marketing & branding activities. These include:
When you’re researching a company or person, social media can be a wonderful companion. Search persons, pages, groups, etc. related to the coin. Connect with the project team, users & investors on social media and ask direct questions.
Check out how well the marketing and branding efforts of the project are going on. Marketing isn’t about writing and publishing articles on cheap websites, it’s more about attractive the user base through engaging content, attractive logo and efficient interaction with the target audience.
A crypto project or token that has significant media coverage (good media website like Forbes) is most likely to be genuine, otherwise, why would a top media website talk about such a token? So, look for media coverage and articles about the token you’re interested in.
The team is the soul and life of a project. The stronger the team, the better will be the crypto project. So, collect as much information about the token team to find out if the team members have previous experience in the industry, what kind of blockchain expertise they have, if they are connected with any well-known projects, how well they know about the project and how easy it is to reach them for questions.
Partners & Advisors
Is the project connected or endorsed by some big players in the industry? For instance, a cryptocurrency that is supported by other well-knowledge projects or businesses like IBM is certainly worth considering.
Things to avoid
While identifying a good project based on positive things is possible, it is also a good practice to try and identify the red flags in a crypto project. These may include:
A ‘Fake’ Team – Crypto projects that only want your money and have nothing to do with actual development will most probably show you a fake team that has no actual existence.
A lot of ‘pre-mined’ coins – A project that claims to have already mined most of its coins is probably a fake, as they simply do not want anyone to actually get involved with the platform.
Giving away huge offers – While offers such as airdrop and bonus are a nice way to market an ICO and get traffic, claiming to give away 100% bonus and unlimited free airdrop coins sound too good to be true.
Fake marketing – Is the marketing team saying false things or making unreal claims related to the project? Then, it’s probably a fake.
Poor quality website/whitepaper – A project that is not serious about getting investors good returns will pay no to very less attention to making a good website and whitepaper with high-quality, relevant and appropriate content.
So, now you know what makes a good cryptocurrency and how to identify one. Be wise in your investments. Do your research and invest only in a high-potential cryptocurrency.