A new wave of Initial Coin Offering and funding market sees a period of massive flourish in the cryptocurrency area. It was driven by the excitement around the decentralized finance (Defi) sphere. Many coins related to it rose in price. If you are a medium explorer, interested in trading, or ready to invest in cryptocurrency and increase your earnings (at least not to lose money on it), it is crucial to choose the right promising project.
One of the first and most essential steps when it comes to investing in the cryptocurrency area is extensive research. Let’s check how to research so you can get a profit and make the right assumptions in the financial world.
Contents:
Step #1: Explore & Review Basic Data
Step #2: Check the White Papers
Step #3: Learn All Details About the Crypto
Step #4: Find out About Employees & Partners
Step #5: Add Other Sources into Your Research
Step #6: Find Out How to Buy Crypto/Token
Step #5: Sum Up All the Above & Learn the Risks
Step #1: Explore & Review Basic Data
If you are a newbie, we offer to begin investigating the current popular currencies: Bitcoin and Ethereum. Yes, you can find many online sources to research but you start with the following books:
After that, you can research small projects. You can find hundreds of various startups, but how can you choose the best one?
Step #2: Check the White Papers
When choosing projects, we recommend researching new and smaller startups, and studying the "White Papers" — a promising company has to have detailed documentation. It must clearly describe the problem that the developers are solving, including the past of the project team. Other significant parameters include:
- Overview of the service’s site: addresses, terms of use, privacy policy, if it has up-to-date content, grammar mistakes, or typos of copy
- See the site’s reputation and safety
- Check for MVP or minimum working prototype
- Check the execution of the roadmap, progression, and deadlines
- Get to know the project community, see how branches are maintained
- Determine the market value of the project and whether it will be useful for the future
- Determine how interesting an idea is, have a clear understanding of what the project is about and what issues it solves
- Learn about the startups' pain points and its innovations
You can also learn what people behind the startup think about it, see the feedback and reviews on any existing issues. After gathering the above data, you can create a SWOT analysis.
Step #3: Learn All Details About the Crypto
As an investor, you should learn about currency in all possible details. Here are the points to pay attention at:
- See if a startup or medium company has been built on an existing chain or the project has its blockchain? Lots of companies have ERC20 tokens as they are built on Ethereum. This way the company is tied into certain regulations as the Ethereum tech and safety issues.
- Check the total amount of tokens issued and if the amount grows up.
- Learn how many tokens/coins will be held by the project.
- Think of the consensus algorithm that is a vital part as you will know how centralized or decentralized it is. The more decentralized, the better.
Step #4: Find out About Employees & Partners
It is a crucial point as we all want to invest in quality, and a good team is a priority. Search through social media and see the previous experience, other projects, and qualifications. You can find useful data on LinkedIn/Twitter/Facebook. You can also ask to make a video call to connect with a team and find people from the community to ask more questions.
Another crucial point is to learn about the strategic partners. Established companies are an important factor as they help to get additional resources, be advertised, etc. So if the startups have many partners, it is a good sign.
Step #5: Add Other Sources into Your Research
After you cope with the above tasks, you can learn more about the project from external reliable sources. You can get information from other developers, check the newspapers, research the competitors, for example:
- You can Google search competitors and make a list with key differences.
- Learn data from external sources such as newspapers, business overviews, and reports.
- Another time-saving and important source is social media. You can also see if the chosen startup is present online and has social accounts.
- Find out more about the startup at Github as many reliable projects provide open sources and are active at the platform.
Step #6: Find Out How to Buy Crypto/Token
So you have chosen a potential cryptocurrency startup. Now check their monetary system. You have to focus on learning where & how you can purchase the project’s tokens/cryptocurrencies, is it exchange or you can get money by a contract. You need to understand how high the market cap is.
Another crucial aspect would be the usage of the Ledger/Trezor or other similar and popular hardware wallets. It also helps to understand how you can store your coins. Remember, reliable crypto companies provide such wallets.
Step #5: Sum Up All the Above & Learn the Risks
After gathering that information, you can get a common understanding of a project and your potential risks. Concentrate your attention on the below points:
- First of all, not all data could be truthful or found on reliable sources. Double-check information.
- Create an excel doc with startups' pros and cons.
- Based on the document, learn if you have as many positive points to make investments.
We guess it's time to do some quality research, check references, and make investigations. Take your time to avoid mistakes and focus on analysis. Do not lose a lot of money because you did not properly check if the project has established legal forms. It could be the investment opportunity of the decade, although there is a lot of junk in the industry. Therefore, it is extremely important to choose projects that have a real value and fundamental basis for growth.
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