Cryptocurrency research can save you a lot of time and money, and there are some easy steps you can take to help keep your portfolio safe from scams and pump-and-dumps. Here are our top 7 tips for cryptocurrency research.
Examine the crypto company whitepaper
One of the easiest ways to tell whether you are dealing with a scam is to run the whitepaper through a plagiarism checker of some kind. If the whitepaper is plagiarized, there’s a good chance that the people behind the project are looking to scam investors for a quick buck. This small cryptocurrency research step can save you a lot of time and money.
On the other hand, a well-written and original whitepaper may convince you of the team’s vision for the future. Read through the whitepaper, and see whether it spells out clearly how the cryptocurrency differentiates itself from the competition. A roadmap is a great way to see if the team is serious about the future. After all, if the team can’t map out how they will progress, then why would an investor take the risk of purchasing tokens?
Check the website
The website should explain the cryptocurrency and the advantages of an investment clearly. If a website seems vague or unprofessional, then it could be a red flag. The website should also be a place for the cryptocurrency to list notable advisors. If the website only has a small team and no advisors, it’s a bad sign.
Some developers may claim that they appreciate their privacy and decide to use pseudonyms instead. If a significant percentage of the cryptocurrency leadership uses pseudonyms, it could be a clear red flag: what “real person” can be held accountable for your investment?
Research crypto exchanges
The most reputable cryptocurrencies are already being traded at some of the most well-known exchanges in the world, such as Binance or Coinbase. Thanks to the sheer number of buyers and sellers there, these exchanges offer liquidity, making it much easier to convert your digital assets to cash (or another asset). Other exchanges might not be as liquid. Coinmarketcap is a great cryptocurrency tool to help you understand the daily volume of thousands of different cryptocurrencies.
Before you invest in cryptocurrency, you should recognize that some exchanges are more secure than others. Exchanges that have been hacked before and those without much liquidity are big red flags.
Engage with the crypto community
Cryptocurrency research is about more than just finding the right cryptocurrency to buy, it’s also about what other investors think about the token. Are they also interested in the long term, or just in particular partnerships that may eventually fade?
When researching a cryptocurrency to buy, you may find yourself in various forums, Discord rooms, or Telegram channels. Watch YouTube channels or listen to podcasts where the cryptocurrency team goes into detail about the token.
Ask as many questions as possible. Other investors and community members can help you with any questions or concerns. However, remember that a lack of transparency is a big red flag.
Determine crypto relevance
There have been many trends within cryptocurrency, such as the rise of NFTs, or investor money now flowing into the DeFi sector. Many cryptocurrencies might pop up and mention these terms, but are they actually contributing to the crypto ecosystem or are they just hoping to cash in on a craze?
If the cryptocurrency is based on a “meme,” rather than any actual use cases, will it rise in value over time or fade into obscurity? Determining the relevancy of a cryptocurrency is a great way to help determine which cryptocurrency to buy.
Cryptocurrency research isn’t just about reading whitepapers: it’s about keeping up with trends and understanding that cybercriminals are hoping to cash in on these trends as much as possible. When trying to understand what cryptocurrency to buy, ask yourself if this cryptocurrency is actually needed in society for some reason, or whether it seems more like an opportunity to profit.
Establish crypto investment criteria
Let’s say that you find a cryptocurrency to buy, only to figure out that it’s on an exchange with very little daily volume. You may think twice about this investment, especially if you want to purchase a large amount of tokens. An important part of your cryptocurrency research is not only what tokens to buy, but also what tokens to avoid, as well.
If you want to find the right cryptocurrency to buy, you will have to have specific rules in place. Are you only purchasing cryptocurrencies that have a minimum market capitalization of at least $1 billion? You may decide to avoid cryptocurrencies where the leadership team is in a particular country. While conducting cryptocurrency research, you should be thinking about establishing criteria for your investment strategy.
Watch the price
You will have to develop your own investment strategy with respect to price action. Are you willing to bet on your cryptocurrency research even if that cryptocurrency is near an all-time low? If it is at an all-time high, are you going to wait for a pullback to invest? Keep mastering cryptocurrency tools that can teach you more about technical analysis to make the smartest purchases possible.
Are you more concerned with momentum, and eager to invest when the cryptocurrency is already rising? The cryptocurrency markets can be volatile. Whatever your investing style, make sure to factor in price action before investing.
About the Author
Michael Hearne
About Decentral Publishing
Decentral Publishing is dedicated to producing content through our blog, eBooks, and docu-series to help our readers deepen their knowledge of cryptocurrency and related topics. Do you have a fresh perspective or any other topics worth discussing? Keep the conversation going with us online at: Facebook, Twitter, Instagram, and LinkedIn.
