Your 7-Point Checklist to Crypto Research

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  • Research is a crucial tool for cryptocurrency investors.
  • Find out what a crypto project does, who's behind it, and how it stacks up against the competition.

This checklist will help you research like a pro.

Almost every article you read about cryptocurrency investing will stress the importance of doing your own research (DYOR in crypto speak). But with so much information out there, where should you start? And what should you look for?

Here are seven items that should be on your crypto research checklist.

1. Understand what it does

Unless you want to speculate on meme coins, your first step should be to get a feel for what the crypto does. Cryptos that have utility are usually better investments, especially if they can be used by a large number of people.

Start by reading the crypto’s whitepaper. You might not understand all the content, but write down any questions you have as you go along -- these will help you as you dig more. If a crypto doesn't have a whitepaper, that’s a big red flag.

Next, do some web research. The more you read, the more you'll find sites you trust and commentators that seem to speak your language. Don't take everything you read as truth -- sadly, there's a lot of misinformation out there. But if you make notes as you read or watch videos, you'll start to get a reliable picture.

Ask yourself what problem the project plans to solve, and how feasible its solution is. Also, pay particular attention to the project's roadmap -- you'll often find it on its website. Has it already done what it said it would do?

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2. Find out if it is active

If a project is not active, it could have been abandoned or could be a crypto scam. There are a few different types of activity to look for.

  • Social media and website activity: Is the website up to date? Does the project post regularly on social media?
  • Community activity: A healthy community is another good sign -- whether it's on Reddit, Telegram, Discord, or elsewhere.
  • Developer activity: If there's been no developer activity for a while, that's a worrying sign. See how active it is on github, a site developers use to track code.
  • Trading volume: Finally, make sure there are people trading the crypto you want to buy. A high trading volume is a sign of greater liquidity and more stability.

3. Check out the team behind it

If a project is serious, you'll be able to learn about the people in charge. Look at their social media profiles, search out more information online, and try to check whether these are people you can trust with your money. If the team is anonymous, or only shares first names and Twitter profiles, you'll need to tread carefully. It's also good to see how big the supporting team is, whether they have any notable strategic partners or investors, and where they're based.

4. Consider the competition

There's no point evaluating your potential investment in a vacuum. Look at the competitive space and think about how your crypto compares with others doing similar things. This will also help you form a view about how that particular sector might perform in the longer term.

If you're evaluating a smart contract cryptocurrency, you'd need to look at things like speed, scalability, and security. For a decentralized finance (DeFi) project, you might look at how much money people have on the platform.

5. What can you learn from recent price action?

It is almost impossible to time the market and buy at the absolute low, but you should still look at the crypto's historical performance. Perhaps the price shot up early in 2021 before slumping, never to pick up again. Maybe it's followed broader market trends or just hit an all-time high. Price history gives you an indication of what might happen next, and helps you decide if this might be a good long-term investment.

6. Look at the market cap and tokenomics

Market cap is a much better indicator of a crypto's worth than its price. The market cap is the number of coins in circulation multiplied by the price. A big market cap shows a coin is more established and probably more stable.

Tokenomics is essentially everything related to the economics of a token. Here are some questions to research:

  • How does it issue new tokens?
  • How many tokens will it issue? Is there a limit?
  • What proportion of the coins or tokens will be held by the project's founders?
  • How will others be distributed?

Pay attention to anything that doesn't feel right. Perhaps a small group of people hold a big percentage of the tokens, or there's no limit on how many can be minted. If a few whales control most of the coins, they will have an outsized influence on the price. If the project plans to create millions more coins, it may dilute the market and cause yours to devalue.

7. What exchanges is it listed on?

CoinMarketCap data shows there are now over 17,000 cryptocurrencies on the market. Of those, only a small fraction are listed on top cryptocurrency exchanges. Being listed isn't necessarily an endorsement, but it does show it's a relatively well-established project.

Newer crypto investors may prefer to stick to cryptos they can buy on a centralized crypto exchange. More experienced or adventurous investors may decide to use a decentralized exchange to access less-common cryptocurrencies. Whichever route you go, make sure you'll be able to buy a crypto on your platform of choice before you spend hours researching it.

Research is the best way to find solid crypto investments

Sadly, there's a lot of inaccurate information out there regarding crypto. But if you learn to do your own research, you'll be able to navigate the hype like a pro -- and make better investment decisions as a result.

Only you know your financial goals and tolerance for risk, and you need to develop your own investment hypothesis. That way, you'll have confidence as you hold through any lows, or know if it's time to sell. Ultimately, it's your hard-earned cash, and only you can make decisions about what to do with it.

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