Doing your own research on crypto is not only heavily advised, but it can also save you from investing in projects doomed to fail. But how do you conclude effective research on a cryptocurrency?
The don’ts of how to do your own research for crypto
Don’t believe any YouTubers with surprised or hyped faces and video titles such as “AMAZING OPPORTUNITY 🚀 1000X POTENTIAL COIN 😲”. They usually just buy heavy bags of low market cap coins, pump them in videos, then dump it when all their viewers bought in as well. Rinse and repeat.
Don’t invest in a cryptocurrency based on one source. Always double or triple-check everything, and take every opinion with a pinch of salt.
Don’t fall for Pump and Dump schemes. They usually involve organized shilling on Reddit, Youtube, Discord, Telegram, etc., claiming to know the next moonshot that will make everyone rich. They do the same as Youtubers, buy bags of a certain coin, “announce” it to everyone involved, and sell their coins when the price is high enough. All the others are left with heavy losses, and the organizers just pick the next coin afterward and repeat the process the next day.
Don’t ignore the math behind cryptocurrencies. What I mean here is we see many newbies come here and say they bought XX, XXX coins because the price was $0.001, and what if it moons and reaches $1,000? Yeah, so prices don’t work that way. /u/Lovinglyhandmade created a great website to help you better understand the market cap potential of altcoins. The website’s name is The Coin Perspective, and it helps you with calculating the price of many coins if they had the market cap of a different coin such as BTC, ETH.
The Do’s of how to do your own research for crypto
You need to understand the basic terminology of cryptocurrencies first. For example, what is a blockchain? What are alt-coins? What’s the difference between a smart contract platform and a DeFi project? If you know these, then great, you can move on to step 2. If not, I suggest you start by researching these terms and try to understand how crypto works in general. Or, you can find the time, I’d also suggest reading bitcoin’s whitepaper.
After you know which coin you are researching (and what type of cryptocurrency that is), you need to dive in and start reading and watching content. A lot. Also, don’t forget fact-checking, this is crucial. One other thing you should do is list its competitors (for example, if you are researching Ethereum, its competitors include Cardano, Polkadot, Cosmos, etc.), and COMPARE the cryptocurrency you’re researching with its rivals.
“Look at what’s wrong with the coin you’re looking at and understand its weaknesses, not just the strengths that the weird minions tell you about all the time.
Does it lack adoption? How long will that adoption take to come? What are the barriers regarding that?
Is the technical protocol incomplete? What are the plans regarding that? How long will it take to have a version that fulfills the project’s goals?
Is it decentralized? If not, is there a plan to make it so? When will that plan be complete and what will the protocol sacrifice in order to get there?
Is the project liquid? Will the developers lose interest if the price does not increase and move on to another project?
I find it’s always best to consider the bad things about the project rather than the good things. It’s easy to sell someone on the good of a project, and much harder to talk about the bad and how to fix that.”
Google “[insert coin name] scam” just to make sure nothing serious comes up. If you happen to find something that might indicate your researched crypto is a scam, make sure to get to the bottom of it.
Do a background check on the Dev team. Can you find them on social media? Are these real people? (Real photos, real posts, real connections, etc.)
Do your own research on people who’re already invested in the crypto project. What about the community behind this cryptocurrency? Are they cult-like shillers, talking about nothing but the price of the coin? Conversely, do they talk about tech and its possibilities? Are they optimistic about future updates and developments?
Check the Nakamoto Coefficient to see whether your researched crypto is decentralized (enough) for you to invest in it.