This guide will walk you through the steps of conducting research in cryptocurrency It doesn’t have to take too much time to research crypto. Once you know what information you need and where to find it, it becomes easier to make informed investments.
This article is intended for crypto investors and the crypto curious — with a breakdown of all the important things to consider.
If you’ve delved into the crypto space for a while, you will have seen these words many times: “DYOR (do your own research) before you invest”, “this is not financial advice, DYOR”. Every source of information you have cited advises you to conduct your own research before making any investment. The Crypto industry is an economic experiment that happens in real-time. More often than not, market actions can be irrational. Market participants (investors) need strong, clear, and measurable incentives not to panic sell in the event of a downturn or “FUD” (fear, uncertainty, and doubt). If the sentiment they have towards investment is not one that is inclusive of the community but zero sum, then you can expect large dumps at irrational times that wouldn’t otherwise require such actions.
Tokenomics, a mix of the words token economics and economics, is extremely important. You need to be able to identify the unique tokenomics of each coin before you even consider investing. Research, especially in crypto, is not always easy.
Oraichain gives an example of tokenomics We’ll discuss what to look for, where to find the relevant information and why. It is impossible to predict the behavior of market participants. Learning about tokenomics is a great way to avoid bad projects and catch good ones, even in bull markets.
Here are some key points to remember when researching a project/token/coin
- UtilityIs there any utility to the token that is beyond speculation? Is there a clear roadmap to help achieve adoption and growth?
- Total Supply(Distribution and unlock schedule, etc.)
How many tokens do you have and how many are in circulation? How are the tokens distributed? How can the remaining supply be released (open to distribution),? What is the annual inflation rate and deflation? It is crucial to ensure that tokens are available for a project. The token is vulnerable to large holders, and highly centralized, if it is allocated to many people within the team or to investors. Important is the fact that you must unlock dates. If unlocking is done quickly, tokens can be vulnerable to large dumps during unlock” (investors cash in), which almost always drives down the price of tokens. Does the token contain a deflationary part? It is always best to understand the deflationary economics of a token; this is known as “burning”, which limits the number of tokens in circulation, to prevent inflation and an oversupply. If the token is deflationary, and furthermore has a burn mechanism that grows in proportion to usage, this is a good sign.
- Demand Drivers(growth drivers and holder incentives; adoption).
What are the factors that will drive adoption demand? You can gauge this by reviewing the whitepaper, joining the groups’ social channels, and listening to conversations. But this information is a double-edged weapon. This information is often biased, and it may not provide the full perspective that you need in order to make an informed decision. This is called “hopium” (hope + opium). Research is key to understanding what drives demand and adoption, beyond speculation. What incentives are there to purchase, hold, stake, and lock the token? The higher the growth potential, the greater the incentive (which must be sustainable). You can also measure the willingness of builders and developers to invest in the project. Ethereum was widely adopted due to its vibrant developer community that built all sorts of dApps (decentralized applications) and Dexes projects on the Blockchain.
- The White Paper- Refer to the whitepaper for the utility, use cases, roadmap, vision, and other details.
- The CommunityAre they interested in long-term growth or only short-term profits? Are they just hype men? Or are they passionate investors like you, or paid hype men? Are they hype men or active participants on social media platforms? Are there bots or fake followers? These are always red flags.
- The Team (developers, advisors, partners).
- The website for the project.
- The Competition- Who is their competition? Are they able to move quickly or is the market saturated? It is a good idea to avoid highly speculative, low-market caps projects in crowded markets.
- Trade Volume and LiquidityThese charts and data can be accessed from most reputable websites that are focused on crypto-related topics, which we will discuss later.
- The Project’s Market Cap — Market cap is determined by multiplying current price and the circulating supply of tokens (the tokens in circulation)..
What are the best sources to trust?
A rule of thumb is to never believe everything you read, even if it comes from the most reliable sources. You will eventually find the source you trust most. Always go to them first for any information. But don’t make them your only source. If you don’t trust your sources, you will make poor investment decisions. There is no one right every time. And, no matter how good your intentions may be, you will still make mistakes from time to time. DYOR uses social media and different sources to provide you with a more informed perspective and opinion on a project that interests you. You will feel more confident in reaching your own conclusions the more opinions you get. Many websites and people claim to be trusted sources of crypto news. It can sometimes become overwhelming to have to sort through so many sources. Even those with doubtful credentials, everyone seems to have an opinion. This is why it is so important to make wise choices in crypto. Are they involved in any past projects? What is the status of those projects, and what happened to investors’ money? What is the size of their following or community? A solid following is a better option than spreading fake information. Follow the most popular websites. They have large followings across all social media channels. This will ensure that you get high quality information. See the comments to see what the opinions are of the followers. Do you think the advice and opinions are balanced? Consider both sides. The best crypto sources will give both pros & cons about any given project, so you get different angles and make a more informed decision. Don’t listen to ads if the person listening is being paid. Paid advice can be dishonest and more often than you think. It doesn’t matter if the source has a motive or an incentive to disclose the information. If they are open about it and honest about it, they are more trustworthy than those who conceal it.
Websites are a great way to get started, especially if you need detailed information about the project. On crypto-focused websites, you can find information such as market cap, trading volume and price history, charts, etc. To see the performance of its recent past, take a look at these charts. This high-level view will give an idea of the risk-reward ratio. The market cap is the lowest, which means it’s more speculative. This way you can actually filter much of the info you need to know if it’s not the kind of investment you want to add to your portfolio, saving you a lot of time.
Recommended — Coinmarketcap, Coingecko, Crypto.com, Coindesk
If the info is time-sensitive, social media is often the best place to get it, especially for projects you are new to and haven’t heard about before. What are the most used social media channels? How can you make them work for you to DYOR!
Twitter’s timeliness makes it so useful. Twitter is where you will find most announcements and helpful comments. You get most of the information instantly, and you can search for the latest trends using hashtags. The return on your investment in crypto is dependent upon how quickly you start a project. Does the coin get listed on major exchanges? It is likely you’ll get it first via Twitter. Twitter is where it all happens first. Twitter, as with all public forums, is full of opinions. Many of these people are selling and promoting the coins to their portfolios for their own personal gain. You can engage different accounts to gauge opinions, read the comments section, and follow hashtags that are related to the project for a 360-degree view. It’s also easy to search for new tweets on a project you are interested in — just type the $ sign followed by the abbreviation of the coin eg $FTM
YouTube is slower than Twitter for real-time info because it takes a lot longer to create content than tweets. YouTube is the best place to find in-depth information on your favorite projects. You will get a better understanding of the topic and a deeper perspective than any other social network. It’s also perfect for beginners who want things explained to them in a simple, digestible manner. A downside to YouTube is that it is rife with affiliate marketers and click-baits, and what makes it even more worrisome is that these types of content creators have found a way to “game” the algorithm into ranking them at or near the top in search results. Accounts with a large number of subscribers should be prioritized. They should have consistent likes, views, and videos that are informative, reliable, and timely. Look at their social profiles to determine if they are active beyond YouTube. This is a clear indicator that they are reputable YouTube accounts. No matter how much you love a channel, don’t limit yourself to just one information source. YouTube should contain at least three main sources. This provides variety and useful information, as well as tips and tricks that can be used to help you understand the market.
Telegram, Discord and other chat rooms have an obvious advantage. They are the best places for active participation in a community. It is essential to be part of active chat groups that are delve deep into niche coins and crypto topics. These channels are great for updates, market sentiment analysis, market trends and market sentiment analysis. You will gain the experience you need to navigate the crypto communities and identify legit groups from fake accounts and bots. The end result is that all groups eventually become noisy and there will always be people sharing highly speculative, or even false information. Never stop looking beyond these platforms. Follow the official channels and groups of any project you are interested in. Pay attention to the behavior of admins. Be wary when they seem too optimistic about the project and it’s with no actual proof of concept or roadmap to try out. Be aware of how they react to criticisms of projects. Avoid clicking on links that appear too good to be true. Be aware of scams and other direct messages. They are most likely true.
The Website & White paper
Bitcoin White Paper Checking out a project’s official website is vital if you are considering investing. These days, a quick gig on Fiverr can create a convincing website, so don’t be fooled by the flashy appearance and UI of a website. A professionally designed website is not enough to make a project a success. Both are not mutually exclusive. Websites that work well and look good will be a sign of genuine potential. Websites should contain useful information about key individuals involved in the project. Poor designed websites, spelling errors, and a lack of transparency around the team are all red flags of an outright pump & dump scheme. White papers can be very technical and contain many details that investors might find difficult to comprehend. However, it is always recommended to read the whitepaper of any project. A whitepaper should explain the purpose of the project, future prospects, and underlying technology. This is something that all great projects will include in detail.
The team’s research
Do you support the right team? The team is the foundation of any project and will determine its future success. A great way to find out if a project is truly capable of succeeding is to learn a lot about its team and advisors. It is a good idea to do background checks on all team members before you invest in projects. Many projects have been destroyed by illicit activities discovered in the backgrounds of core team members. A great crypto project should be transparent about its developers and team. It should also have impressive partnerships.
- Is there a team of people or a large number of them “doxed” (their true identity is revealed), well-known, and reputable?
- Which projects have they worked on?
- How responsive is your team to queries and questions?
- Are they able to test the prototype? Is there a roadmap?
- What collaborations or partnerships have they formed to make this project a success?
- What news outlets are discussing it?
What have reputable crypto-focused news websites said about the project and how often has it been featured in the media? If it hasn’t, don’t assume it isn’t a good investment, but it should give you an idea of how unknown/risky/speculative a project it is. A good indicator is if the articles on the news sites are more analytical than informational/trendy.
It can be both a good thing and a problem to involve celebrities in projects. It’s good for the project, as it introduces the idea to a wide audience. On the other hand, celebrities can be used as a way to increase prices and make rug investors. This is a regular trend in the crypto space. It is possible to quickly drive up prices by using celebrities. If a project does not grow through a dedicated community and is promoted solely via celebs, then it is always a red signal. Celebs can be a sign that a project is large enough with strong foundation and support from a large community. NFTBored Ape Yatch Club collection Meeting up with crypto enthusiasts is a great way for you to connect with other people and get involved in the project’s life. It is always a sign of good things when communities around a project host meetups and events to discuss the future and growth of the project. Sentimental analysis is a way to understand the investor behavior in volatile markets like crypto. With sentimental analysis, you’re looking past the numbers to see what the market is thinking and feeling. This research is often done via social media, news stories, and public forums. This has a downside: market actors are not always rational. Public figures such as Elon Musk can have an enormous impact on asset prices by tweeting one. Real-time sentiment towards crypto might not be indicative of actual events. One tweet by Elon could cause a coin to lose a lot in value, but that doesn’t change the fact that they may still be on track to accomplish what they set out on their roadmap.
DYOR never ends
DYOR is always present, so you must be vigilant and active about your portfolio. Even if you’ve invested in the project, this applies to all investments. Things can change rapidly in the crypto world, and one wave of FUD (fears, uncertainty, and doubt) could leave you vulnerable. Investors need to be informed about milestones, changes and additions, announcements and threats from other projects, changes to the team, and any other pertinent topics.
Don’t believe everything you read
DYOR is not about blindly believing what you read or the tips/predictions you see. Bad faith advice is common in the crypto industry. It can be hyped, coin shilling or straight-up pump and dump. Avoid promotional articles on news sites. They are usually exaggerated headlines designed to generate clicks, hype, or FOMO (fear that you’ll miss out). When you’re done reading, always consult other SM channels to try and get the full picture.
Patience is the key to success
Avoid FOMO (fear or missing out) when investing in crypto. You will most likely learn a hard lesson. Never rush into an investment, especially if you don’t fully understand it yet. Be aware that we are still at the very beginning of things and that there will always more great opportunities. Keep curious about new projects and be interested in the industry in general. Participate in the conversation on current topics and voice your opinion on SM platforms. It makes it more engaging and fun. Trust your gut instincts. Crypto is emotional and you should trust your gut instincts. If something doesn’t feel right, it’s best to stay clear. You will find the right community or project for you if you are engaged and have a clear understanding of your needs. Staying unemotional is key, but if something doesn’t feel right about a project or website, try not to “ape in” until you have found compelling reasons to do so.