‘Do your own research’ – this is something you hear quite often once you get into the crypto space. And there’s a good reason behind it: with so many digital assets on the market, it can be quite hard to keep track of them all. Plus, not all cryptocurrencies provide the same value, and some aren’t even legitimate, so research is vital before investing in a specific asset. Some cryptocurrencies, such as Bitcoin, are already well-established, which means they are relatively safe investments. Still, this doesn’t mean you shouldn’t research them. After all, you want to choose the crypto that best suits you, so take the time to learn how to buy bitcoin and what makes it different from other cryptocurrencies.
Researching will make an entire difference in your investment journey, determining whether you will profit from cryptocurrencies or lose your hard-earned money through poor projects. Remember that no one would ever give away free coins, and if you believe something seems too good to be true – well, you should trust your intuition.
Here are some aspects to look for before committing to a certain cryptocurrency.
Crypto projects typically provide a whitepaper, a document describing the vision, purpose and philosophy of that specific cryptocurrency. A whitepaper is available even for Bitcoin, whose creator is anonymous, and its purpose is to explain to investors how they could potentially benefit from the project. Although whitepapers often include technical jargon, which can be difficult to understand as a casual investor, it’s worth reviewing it to understand how the crypto works and the problems it aims to solve. If a white paper makes a lot of generic promises but doesn’t provide any details, that is often a red flag on the project’s value.
Behind cryptocurrencies is a team of skilled developers and founders who play their part in finding the solution to a specific problem. So, if you want to gain insight into the potential performance of a project, you should start by researching the team’s experience. This means reviewing their LinkedIn profile and checking their professional background, and identifying the previous projects they have launched. If the team keeps their identity hidden or hasn’t created any other project, this is often not a good sign – Bitcoin is an exception to this rule.
Cryptocurrencies are underpinned by blockchain, an innovative technology that aims to improve financial services while solving existing issues in the traditional financial system. That said, it is important to look into blockchain and how it works, as this will help you understand the cryptocurrency’s role in solving a problem, thus giving you insight into its potential growth. While you may struggle to grasp the technical aspects, the cryptocurrency website should be able to provide the information in plain language.
Tokenomics comprises all aspects of a token’s economics: distribution, circulation, and supply. Researching this information is crucial to understand how all these aspects affect an asset’s price over time. In fact, the price of a specific crypto is linked to supply and demand, as the price can increase only if there is more demand (which happens only if there are many shares). Hence, before investing in a cryptocurrency, make sure to review the circulating supply, the total supply, and the maximum supply.
The price data
It’s well known that crypto prices fluctuate constantly, and this is due to many factors, including token supply, project milestones, marketing efforts, and so on. Reviewing the price data of a specific cryptocurrency is something any investor should do, as it helps determine how the project has evolved over the years. Moreover, it can indicate if a cryptocurrency has growth potential or is falling behind. Suppose a digital asset experienced a significant spike in price but never truly recovered over time; this means it may not be worth it to put your money into it. The same is true for trading volume and market cap. If the crypto market cap is declining or there is no trading volume, the project may not be lucrative in the long run.
Cryptocurrencies require a dedicated community to grow, so by looking into this aspect, you can figure out whether a project can succeed or it’s pure speculation. You can join these communities on platforms like Telegram, Slack, Discord or Reddit and find the answers to your questions about the crypto project. Suppose the community base is well-organized and often promotes the project; in this case, the crypto is likely promising. On the other hand, if the engagement is sparse and there isn’t any significant discussion on the community platform, the project is probably not worth investing in.
Tens of thousands of cryptocurrencies are now available, but they aren’t all legitimate, so it’s essential to research the project’s reputation to ensure it is reliable. Thus, consider checking Reddit forums, social media platforms, or Discord channels, as this will help you get a feel for the perception of the project. If the majority sees the specific cryptocurrency in a negative light, that’s probably not a good sign. You can also establish the project’s reputation by finding out who supports it. If reputable investors and institutional backing are on board, this indicates that the project has a great chance to succeed.
Research is crucial in finding solid crypto investments
There’s a lot of information regarding crypto all across the Internet, but not all of it is accurate. This is why doing your own research is so incredibly important – once you learn the ins and outs of the market, you’ll navigate this complex industry like a pro, thus making better investment decisions.
Remember, no one has the same financial goals as you, so you must develop your own investment plan. That way, you will remain confident even during challenging times, and you’ll be able to use your logic and determine whether it is time to sell or not. Ultimately, your money is involved, so you’re the only one who can decide which project is worth investing in.