How to Research Cryptocurrency

When you are considering investing in cryptocurrency, taking a cryptocurrency job, or getting otherwise involved with a project it can be less than easy to know where to start digging a little deeper into a project of interest. In recent years countless projects have started, so it can be overwhelming to quickly do some basic research on them until you know where to look. There are a range of things you can do fast to help you establish if perhaps you should spend a little time looking at a project you may want to invest in.

What Do I Need to Know Before Investing in Cryptocurrency?

It is an extremely volatile asset class
It is less regulated than traditional asset classes
The basics of influential cryptocurrencies like bitcoin and ethereum
How to send and receive cryptocurrency
That risk management is important
How to store your cryptocurrency safely
Informed choices are always the best choices
Guaranteed returns are something to question thoroughly

Does it Solve a Problem?

The first question that can knock a lot of things off your radar is to ask yourself, does this project solve a problem or does it do something better than how others have done it in the past? If the answer is simply "I don't know" that's not necessarily a bad thing and if it's piqued your interest in some other way it just makes sense to keep digging and learn more about the potential and business model associated with the project.

Beware of projects that make outrageous promises, while some of them may come through and be the next big thing, often a "too good to be true" premise is a reason to be skeptical. However, sometimes the claims and hype are genuine.

Is the Team Competent?

Don't be necessarily frightened by some fresh faces you haven't heard of before, but at the same time don't just assume people are capable of achieving what they claim. If you are looking to make a significant crypto investment imagine yourself handing money directly to these people, do you feel safe doing so after learning a little about them? Do they have an online presence, have they been involved in other projects (not even necessarily in crypto) that you are aware of or also respect? These can be all good things to consider when looking at a crypto team. Look at the broader team as well, avoid looking solely at just the development team or advisory board for example, while core teams like development play a significant role at the end of the day, the broader team will affect the project in countless ways as well.

Education and other factors can be of interest as well if the information is public. However, in 2020 self-taught isn't as bad a thing it perhaps once was in many circles, especially not in cryptocurrency where often some of the most impactful people have come from unusual backgrounds. In the past though, some questionable projects have included prominent community members listed as "advisors" sometimes without their knowledge or consent, always be cautious when researching the team involved, and don't just believe what you read blindly, especially if it seems unusual.

Does it Make Economic Sense?

At first glance, you may think this could be a difficult topic to unpack on your own, and depending on the goals of the project and the various variables at play, it might very well be hard. It is always good to try to understand a few things though in regards to the economics of cryptocurrency projects.

One of the biggest things you can look at is a pretty straightforward one, though it isn't something that has a cut and dry answer, do they have enough money? If a project is new, it may be harder to gauge this, but look at the goals they are trying to achieve, the size of the team, and their projected timelines. If you think it could be difficult for them to fund themselves well beyond the projected timelines, this may be cause for concern. It's a significant risk that a project running on a shoestring budget could run out of money, leaving the project abandoned. If the company has been operating for some time, you may find looking at economic considerations a little easier.

If the company has been consistently hitting its milestones and making progress, the odds are reasonable to expect this to continue in the short term at least. Though not guaranteed, showing regular progress is a brilliant sign that a company will continue to produce and improve on the work they have been doing. One of the things that may be a potential negative is slow work and a high burn rate on secondary elements, such as throwing money at expensive exchange listings or over the top marketing promotions. While marketing is essential, if there's not a reasonable consideration for timing and having things to market in the first place, the project may result in just being a short flash in the pan that finds itself struggling to fund development later.

A final consideration can also be had for whether it makes economic sense in the long term. As primary goals start being reached for the project, will the company be able to finance itself into the future with the services it provides? Questions like this may not always apply, but that is worth asking. If a project is somewhat self-sustaining (like bitcoin), then you have less to consider here and focus more on how development is funded and other matters that can affect the economic viability of a project long-term.

Do Some Technical Analysis

While given more or less weight depending on who you talk to, there are some basics to consider when trying to get some sense out of a cryptocurrency chart. You can see how active a digital asset is by checking statistics like trading volume, and whether the general trend is bullish (trending up) or bearish (trending down) over time. Taking note of the market cap (multiplying the value of a single coin or token by the full supply available) can be useful as well. It's crucial to take things like coin/token supply into account when looking at prices as the price of a single unit will not tell the whole story if you don't know the total number of units available, this is why the market cap is a useful metric to have a look at when it comes to the technicals.

There is a range of indicators people use for technical analysis. While this is a little out of the scope of this article, you may find spending a little time learning about some of these common indicators helpful when doing your cryptocurrency research. If you are looking at something in the short term, focus more on recent data by looking more at shorter time frames. If you want a broader picture of what's been happening and some indication of the overall market sentiment, zoom out. If you want to learn more about technical analysis there are abundant free resources online that you will be able to find with a quick search, many indicators used in traditional markets are perfectly valid and often used by cryptocurrency traders such as RSI, Bollinger bands, MACD, and EMA.

Project performance isn't always directly correlated with coin or token price either. Various external market conditions can affect the market price of an asset. Taking a technical look is a useful addition to a broader investigation into an asset you may be interested in learning more about. Just beware that sudden bitcoin price movements, regulatory changes, and much more can have a dramatic impact on the price of a cryptocurrency.

There's a lot of potential for social media when you are investigating cryptocurrencies. However, the most useful things aren't always apparent. Looking for hype posts won't provide you with a whole lot of value. You can gain some insight into things like brand recognition, community size, and other variables by looking at more measurable metrics. Have a look across the various social media accounts a project has, and if a project has none, this is typically an odd sign. Having a social media presence is pretty standard these days so a lack of this can be a cause for concern, especially if it was a "hot tip" from an acquaintance or someone you follow online. You can use social media to check simple metrics like follower counts, activity on platforms like Telegram if they use them, and get a feel for how people engage and discuss the project by having a look around and doing a few searches.

The downside of social networks is that it can be misleading too, quite often people will get caught up in the hype of a project that is doing the rounds in the cryptocurrency circles on Twitter, in Facebook groups, and so on. The problem is without additional information you don't know what the basis for this hype is. Perhaps there is a competition going that is encouraging large numbers of posts, maybe bagholders are trying to pump the project to get a profitable exit. Use socials like Twitter and Reddit as part of your research, but never use it as the source of all your information. Many cryptocurrencies that have made waves on the major social platforms in the past have with extreme hype have resulted in less than impressive results once the hype has passed.

Development Activity

If you are a developer yourself you have a little added ability here as you'll tend to find it easier to gauge the development activity of a project. In many cases though, you may be limited by a lack of public repositories that you can view. Lacking publicly viewable code isn't in itself a bad thing at all depending on the type of the project, but when the project does have publicly viewable code you can take note of how active the project seems to be. If you are more versed in development you can also do things like investigating some of the recent commits, are they filler or do they seem to be actively trying to improve the code base? If you aren't particularly well versed in these matters, you can still poke around and ensure that activity appears to be recent and consistent if there are one or more repositories available for public viewing.

If there isn't any code you can check out, investigate their blog if they have one and other news released by the company to see what sort of updates they are releasing. How much progress they seem to be making on the development front can be a good sign of what to expect in regards to the pace of the project. If a project is still in the planning phases after two years, perhaps the problem they are trying to solve is more complicated than they had anticipated. If regular progress is being made, this is often a good sign.

How Not to Research Crypto Projects

There are a lot of ways you can learn more about a crypto investment opportunity, but if there is one thing you shouldn't do it's jumping in blindly. Like all investments cryptocurrency investing is risky, this is not financial advice and if anything the key takeaway should be, do your own due diligence. Look at a range of factors and see what the right decision for you is in each case. Never FOMO into buying a new cryptocurrency you aren't sure about just because a friend, colleague, or someone you met online said you should. You should never even assume paid advice is honest advice, using only one source to analyse a cryptocurrency is something that frequently can lead to adverse outcomes.

The best investments are the ones you base on source research. Doing your own research helps you get a feel for the different aspects going on inside a particular project and is an excellent foundation for how to research cryptocurrency.

We hope this article got you more interested in the various factors involved in assessing cryptocurrency yourself. While there is much more you can do, these are some simple tips to get you started thinking more about different cryptocurrencies that may have gained your interest. You can rarely have too much information and the more informed you are, the better placed you are to make great decisions whether it's buying cryptocurrency or getting involved in the project in some other way.

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