Cryptocurrency is a growing, active, and dynamic world. Projects, tokens, and coins come and go on a daily basis. Some have incredible potential, others fall short of their promise, and some admit to be cash grabs publicly. It is hard to know which are worth your time, especially as polished, solid efforts are frequently revealed as scams, and stupid ideas see 10,000x growth.
No one knows what will make money. We can only try our best, researching the materials, and making informed decisions. But how do you look at a project to judge if it is a buy or not?
These are my methods.
Understand the fundamentals
Start by researching and understanding the fundamentals of the cryptocurrency you're interested in. Look for information about its purpose, technology, underlying blockchain, and the problem it aims to solve. Read the project's whitepaper, explore its website, and follow reputable sources for news and updates.
Is it a meme, a utility token, something else. Having a handle on what it tries to do can help you determine if it will be successful, or face difficulties. Some memes are timeless, while others seasonal or temporary. That can effect whether you are early or late when investing as hype follows ups and downs. Utility tokens are good, but may be replaced by other technology, or be forgotten over time. Great projects flounder despite their use simple because they do not properly market themselves. Pay attention, and understand the basics.
Assess the team and community
Evaluate the project's team members, developers, and advisors. Look for their experience, qualifications, and track record in the crypto industry. Additionally, assess the size and activity of the community surrounding the project. Engage in online forums, social media platforms, and dedicated crypto communities to get a sense of the sentiment and reputation of the project.
Frequently, scam projects list fake individuals, or lie about professionals attached to the project. This can easily be proven by basic searches of the names on places like LinkedIn, or social media. If you are going to risk your money, you should have an idea of who will shoulder the responsibility.
Examine the technology and innovation
Dive into the technical aspects of the cryptocurrency. Evaluate the scalability, security, and efficiency of its underlying blockchain technology. Assess whether the project introduces innovative features or improvements compared to existing solutions. Consider factors such as consensus mechanism, smart contract functionality, interoperability, and potential for future development.
Ultimately, this can be a mixed bag. Many great technologies fail to launch. You might choose the best project, and lose everything, while inferior technology makes a huge profit. Although the markets generally reward good work over bad, it is not a given. Still, you can benefit from proper understanding, as the knowledge can help you evaluate all projects within a shared space.
It is also important to know a thing or two about cryptocurrency. Even if you only care about investing and profit, knowledge of the technology is a must. Without it, you are relying on luck.
Analyze the market and competition
Research the cryptocurrency's market position and competitive landscape. Analyze its market capitalization, trading volume, liquidity, and price history. Compare it with other similar projects and evaluate its unique selling points or advantages. Consider the project's potential for adoption and its ability to stand out in a crowded market.
This is good to understand. I mentioned a good project can fail. When it does, marketing is to blame. You might really like a coin, but there is no community behind it, and the dev team are all introverts that have no public interaction. It is a hard sell, and will not likely see success. But a coin that has constant discussion, hype men, and an active dev team will probably last and see some success, even if it is only a fork, or dumb idea.
Review partnerships and collaborations
Investigate the project's partnerships with other companies, organizations, or influential individuals. Assess the significance and credibility of these partnerships. Strong partnerships can provide validation and open doors for adoption and growth.
This is another great way to check if a project is respectable and valid. But don't trust it from just one source. If it is a scam, they may be claiming partnerships that do not exist, or grossly overstating those connections. Just because they are using a Azure cloud server does not mean they have a partnership with Microsoft. Be wary. Be careful. Understand what you are getting into.
Evaluate the tokenomics and use case
Understand the tokenomics of the cryptocurrency, including its distribution, token supply, and token utility. Evaluate the token's use cases within the project ecosystem and assess whether it has a clear value proposition and utility beyond speculative trading.
At times, a project might be great, but is ruined by the distribution of its coins. See if the dev team has kept the super majority of a pre-mine or has otherwise engineered a monopoly for themselves. This allows them to rugpull at any moment.
Depending on what you learn, investing might not be a great idea. In fact, if you still want to invest, it may be better to establish a trading pair and provide liquidity. But that is another topic, entirely.
My Final Thoughts
There is a lot of money to be made in the markets. There are good projects, great projects, and outright scams. A little bit of investigation can help you see what is gold and what is junk. But you have to do a bit of work. Don't throw your money away. Be smart, research, and make some money on your investments.
