How to Research and find the next Cryptocurrency GEM to Invest (DYOR)
When it comes to cryptocurrency there is nothing more important than doing your own research. if you’re serious about your cryptocurrency goals you are going to need to learn how to do your own research which will help you figure out which cryptocurrencies to buy and which ones to stay away from.
Below are the ingredients, the separate a cryptocurrency from being a quality one from a good or one dumb one.
The first criteria I look at is — vision. Vision means what is the objective of the project, what problem are they trying to solve, how are they planning to solve those, how much is the scale of the problem.
Let’s break down this into the following question
a) What is the type of cryptocurrency this project is about :
Is it a currency ?, Is it an infrastructure coin?, is it a Dapp/utility coin, is it a privacy coin, is it an NFT coin, is it an IOT cryptocurrency?
The type of cryptocurrency typically dictates what they are looking to achieve.
b) What is the pain that it’s solving?
What kind of problem is it solving, is the problem worth solving?
c) What is the scale of the pain?
If the scale of the pain is massive, solving those pain can reach success.
d) How unique is the solution?
Is it the only solution or how different is the solution from existing solutions?
e) Can this have a first-mover advantage?
Can this project is first to the market, does it have a head start on everybody else? If it does have that head start, it’s got more of a chance of making profits.
People get sold into the vision. Vision may look great on paper but what if the people behind it can’t help make that vision come to reality? then it’s unlikely that vision will ever come to reality.
So when investing I look at following in a team
a) Is there a superstar CEO, executive, developer, or advisor?
A superstar is a person got some real-world experience doing things at a high level, with at least 5 years of experience in the niche that the project is operating on. E.g. if the project is on payment, the superstar would be someone who worked in the banking space. Look the project has either a CEO, executive, advisor, or developer who has expertise in that particular niche. If a person has worked inside the cryptocurrency industry, just one year of experience can be considered good enough as it’s relatively a new industry.
b) Is the superstar well connected?
Do they have links with other people from within the industry that are likely to be called upon if they need help?
c) Are there enough developers for the vision?
In cryptocurrency, most things are technology-focused, so you need to have a breadth of developers to achieve that vision.
d) Size of other departments?
Size of other teams whose role is to perform various functions within
the business like finance, strategy, marketing. The more team members, the greater the chance of achieving the vision, because you’ve got the manpower to achieve it at speed.
Technology is one of the most fundamental things to achieve the vision, certainly in particular cryptocurrency projects like infrastructure & protocols.
When checking the technology behind the vision we can ask the following questions:
a) What does this technology enable?
What does this particular technology enable?. Does it enable speed, does it enable safety, does it enable scale or does it facilitate ease of use or some new stream of business?.
b) What is unique about the technology?
What makes the technology stand out? Is this something new? or is it similar to something existing?
c) What improvement does it have over the existing technology?
What improvement does it have over existing technology? If it is trying to achieve the same vision of another project differently, with better technology, which may be great because it’s likely that it can achieve faster speed, greater scale, better security, better interoperability, etc. For example, Zilliqa is a platform similar to Ethereum which implements sharding(a way of partitioning segments of the blockchain and making them do individual tasks very quickly), improving scalability.
d) Does the team have the expertise and skills to achieve that technology?
You need to make sure that the team has the experience and skills to achieve the technology, because a technology written down on paper may all sound good. If they don’t have the team that can achieve it, it will never go anywhere.
e) Do the team have published a White Paper?
Is there a white paper written for the project explaining the technology behind it?
f) Is there a testable MVP
Is there a publicly available alpha version of the product that can be used for testing put on GitHub?
What the team going to achieve in quarter one quarter to quarter three, quarter four, etc is very important for getting regular profit from your investment.
a) Is there a road map?
Typically you can find that roadmap on the white paper. Check whether they have a road map laid out describing the events that they have planed during each interval of time.
b) How regular are the updates?
If some regular updates and items are being achieved on the roadmap, that means that there’s going to be consistent bursts of value in your investment. Otherwise, you may have to rely on speculation, if things are not rolled out regularly.
c) How significant are the updates?
Significant updates are what lead to significant bursts of value.
If it’s a tiny, tiny update or something insignificant and will lead to nothing. A milestone is when you have built a product or built a feature that’s significant for the product. For example, you are launching on test net or you’re launching your main net.
So essentially, one significant update per quarter will lead to nice consistent bursts of value.
5) Token Metrics
When it comes to cryptocurrency investing there are two main sentiments that drive investing — one is emotion, the other is data.
If you don’t feel emotional about the vision or the tech or the team, the metrics of the data make you feel confident that investing in this will lead to a profit, that’s where Token Metrics comes in.
a) Is the cryptocurrency undervalued?
Are you buying a cheap cryptocurrency compared to how expensive it could be in the future?. How can you check this is to do a market cap analysis of the coin you are going to invest in versus the competition.
Take a competitor and check its market cap, compare the market cap of the coin you are planning to invest in, see how many times the competitor is higher than the new coin, that can be the potential of the new coin if it does well. This is comparing the undervalued one with the leader to find how much potential is there for an undervalued one.
b) What is the Coin Supply?
If there is a small enough supply for a large enough demand, that could mean that the price would skyrocket.
If it’s a large supply and not very much demand, the coin won’t go anywhere.
Market cap= circulating supply * coin price
a) Large-cap coins: 10 billion $+
b) Midcap coins : coins > 200 million $
c) Low cap coins : coins <200 million $
Always pay attention to a cryptocurrency’s market cap rather than the actual dollar value of the coin or token and think in percentage terms rather than dollar denominations.
d) How is the Trade volume?
Check for consistency and volume of trade. Examine how does the market cap compares to the trade volume? does the trade volume exceeded the market cap?.
Look at the historical data, check the consistency of trade volume over the last few days.
If the volumes are consistent and its ratio of market cap to trade volume is low, you can tell the coin’s relevance is high.
e) Is the Coin inflationary or deflationary?
A cryptocurrency is either inflationary or deflationary.
A coin could experience deflation when it has a fixed supply and inflation when the amount of produced coins or tokens is infinite.
if a cryptocurrency has too much inflation it can reduce the value of the coins or tokens already in circulation over time. For deflationary cryptocurrency, the reduction in supply increases the value of that cryptocurrency over time.
6) Token Rewards
What rewards do you have either being a member of the platform or for holding the cryptocurrency? if you are holding the cryptocurrency that’s giving you rewards, you’re more likely to stay invested.
a) Does it incentivize Holding?
Rewards enable people to hold back because if they are receiving, let’s say, a monthly or weekly or quarterly or even yearly dividend or they are receiving a certain amount of free coins for holding, they’re more likely to stay invested versus a cryptocurrency offering nothing for holding.
b) Does it offer master node or staking rewards?
A master note is when you have a certain number of tokens to qualify for being one of the keepers or watchers of the network, by which you get really good rewards.
The people who are staking on the network are the ones that are put their cryptocurrencies in the staking wallet for maintaining the network, making sure that it’s running properly, that they’re achieving consensus faster, and so therefore they get rewarded for that.
c) Does it provide you any power in the network?
Do you have the voting power?. If you have a certain amount of tokens in certain networks, you can vote for project plans on the forums.
d) Does it provide rewards for actions?
Does it provide more coins for any actions performed on the platform? So for having these rewards, people more likely to hold them.
A community can be the making or breaking of a cryptocurrency.
If the community is happy, if they’re feeling bullish, if they feel positive about their investment, they will stay invested and encourage more people to invest.
a) What is the size of the social media presence?
How many followers do they have on Twitter, Facebook, Instagram?
How big is the telegraph group of a particular cryptocurrency?
How many likes have they got on their page on Facebook?
Have the project got a YouTube channel and have they got many subscribers?
This gives you the level of engagement that the community is giving or is committing to a cryptocurrency that subscribes to it.
b) Do they have high team interaction?
Do they do a discussion on their telegram channel? Do they prioritize, and answer technical questions, and explain what they are working on?. This keeps investors happy, keeps them staying, keeps them loyal.
c) What’s the quality of the conversation in the discussion channels?
Is there more quality interaction than there is low quality or is there more low quality? like, are people asking relevant questions related to the project or just asking When Moon, When Lambo ?.
Stay away from projects with mostly low-quality interactions because that could end up investors just leaving because of not achieving gains quickly enough.
d) Is Reddit forums active?
Is there a community for are people on Reddit, promoting the cryptocurrency?
Are they on Bitcoin talk, promoting the cryptocurrency, and telling as many people about the project?
An active community means a supportive and promotional community, which increases visibility and promoting the cryptocurrency in wider circles
e) How much is the Hype?
How emotional are people feeling?. How excited are people feeling?
Hype is typically good if quality members can be seen on Twitter, YouTube, Facebook posts, articles, etc explaining the benefits of the project, quality of the project, why they love it, or why they invested in it.
Is quality people feeling emotionally bullish on it? it’s a great thing for the project.
8) Venture capitalists
Venture capitalists just not only put their money they also provide expertise, business expertise, operational expertise, expertise in forging partnerships and they are will connect that they can get coverage for their cryptocurrencies.
The money follows the smart money, venture capitalists do not like to gamble which can increase your confidence in a project. A lot of retail investors invest in rubbish coins because they like to gamble.
There’s also a little bit of a risk with the venture capitalists, when they invest their tokens are normally locked up to a specific time. But once that the lockup ends, if the price is gone up a lot, then there is potential for a big dump when the venture capitalists start to liquidate their profits.
So when looking at venture capitalists you need to look for and what are they? how do they operate? what kind of influence do they have.
To find whether the project is having good VCs, you can check their website or an open data library called Cypherhunter.
Keeping these in mind will make sure you have got a much bigger chance of making a profit, than making a loss.
Doing your own cryptocurrency research can be a lot of work but ask yourself this, few hours of research worth making a 100x return or more on your investment?. If you can get good at doing your own crypto research you will become one of the few people who knows what’s going on when the retail FOMO starts to hit during the bull market.
Note: I am not a financial advisor and nothing in this write-up should be considered financial or investment advice. I have combined these techniques by inspiring
The Research Tools I use :
Cryptocurrency Prices, Charts And Market Capitalizations | CoinMarketCap
Top cryptocurrency prices and charts, listed by market capitalization. Free access to current and historic data for…
CoinGecko: Cryptocurrency Prices and Market Capitalization
Get cryptocurrency prices, market overview, and analysis such as crypto market cap, trading volume, and more.
CypherHunter - Data Intelligence in Crypto
CypherHunter is building an open data library and curation tools that help everyone to fully understand what is…
Real-time data analysis at the tips of your fingers:Create unique trading strategies, anticipate market movements…