Article written by Darius Lawrence Oct. 17, 2021
When leaning into a crypto life there is something you will hear a lot (from us as well) that one thing you will hear a lot is “Do Your Own Research.” Only by doing your own research can you truly know if the decision on either crypto is the right one for you, and not just because someone else said it was.
No Pain All Gain
Save yourself all of the stress and pain by being a prepared investor. What is a prepared investor you may ask? Why a prepared investor is one that is mentally prepared and financially prepared for everything involved with the choice they make towards a project. This means being fully aware of all aspects of the project and preparing yourself for any unforeseen negative situations that may arise.
Blockchains are growing by number and of course, that means that the number of coins, projects, NFTs and so forth will continue to proliferate the markets as well. There are hundreds if not thousands of coins that are out in the market and it is definitely increasingly important to be able to weed through all of the “s**t coins” that crop up daily. DeFi is at a period where the growth of the industry is dependent upon the survival of quality insightful projects. The industry can only be allowed growth if there are legitimate platform-building projects that are properly backed and have liquidity. Research is the bridge that closes the gap between an average investor that throws away money and a wise investor who catches the moon more times than not.
Welcome to the basics of doing your own research. Here in today’s class, we are going to share with you how to use your basic understanding of crypto to go even further. First, make sure you are familiar with all the terms and tools at your disposal. You should definitely know how your wallets work and which blockchains they work on. You should be familiar with the different wallets for different blockchains, you should be able to keep your own wallet safe and secure, this means knowing about your public and private keys and knowing the difference. You should also know how to bridge between chains as well.
Make yourself acquainted with different tools and dApps (decentralized apps) as that is another basic necessity. There are so many tools that can help make your trading life easier so being familiar with those tools can be most helpful. There are many new dApps in the Web3.0 space, automated market makers, decentralized exchanges and portfolio trackers are all excellent tools of the trade.
Sites like CoinMarketCap , though not perfect, will do good to provide you with as much information on coins as possible. CMC allows the user to customize the account to make it more accessible by the user.
Be A People Person
You can tell a lot about a project from the people involved in it. Here are the things you should be looking for.
- Check the website. No good project will have a website that looks like a teen made it with an instant online webpage builder. You should look for grammar mistakes, spelling errors, and bad formatting. Make sure all of the links are working and take you to exactly where they say they are going to take you. Check the date of the website as well. If the project has supposedly been around for three months but the website is only a week old then there is definitely an issue.
- Check the whitepaper of the project to make sure things are on the up and up. It is customary for projects to reveal a whitepaper or roadmap detailing the plans of the project in as clear terms as possible. The whitepaper should have a detailed explanation of the utility of the coin or NFT. You should be able to have a clear concept of what is meant to happen over time with the project. Watch out for roadmaps that seem too good to be true, true lofty or ambitious, or just too short.
- A solid project will have actual obtainable goals that seem legit, a project with goals that sound too good to be true probably is.
- Checking the team behind the project is the next big thing to do. Make sure you look into the backgrounds of the people who are doing the project. This entails checking their credentials, finding their socials if you can, and their LinkedIn. Find out if they have ever done anything like this project before, have they ever worked in technology? What qualifies them to be trusted on this project? Make sure to check for any previous or current partnerships as well, you know the saying “birds of a feather .” and all of that. The more partnerships a project has the better the chances are that the project is legit and ready to blow.
- Social media is indeed a tool but just because they have a large following and some of their following is well-known in the sphere of influence it does not mean that the project is automatically a good one. A lot of projects now will shill to influencers to get them to promote their project whilst those influencers have little to no interest in the project at all.
- Make sure you check on the market cap of a token as it is a great indicator of the health of a token. The market cap alone will let you know the amount of money that has been input into the project. If the cap is large then that is usually a good sign. Small caps are usually a sign of what is called “pump and dump” where the hype is built to influence buyers to purchase and once the coin or project reaches a certain amount the developers take all the money and disappear, also called a rug-pull.
- The supply of the token is very important as well. The amount of a token is a key reason for the price. A good example would be Bitcoin as bitcoin is known for having only 22 million in circulation totally. It is also important to know who is controlling the circulation of that supply. Would the developers be holding any and if they are how much of the supply are they holding, if the developers hold a commanding amount of the token then that is a red flag.
- Consider the location of a token as well. Where is the token being held? if the token is on a reputable market then that helps with the reputation of the token or the project.
The market already moves very quickly so tools and thought processes will of course change just as quickly. Traditional investing has many classical strategies you can research and use but you must also add a more critical eye when investing in crypto.
The fact is crypto isn’t an easy system and those that actually learn the market will definitely be able to achieve greatness. The industry is still very young and very volatile with tons of vulnerability. The safety and security of your money is always going to be your responsibility so stay safe and stay focused. Now go out there and become the next guru!