How to choose a project for investment     

Regarding cryptocurrencies, it is very tempting to look only at a price. If we were only looking at numbers, we would say that investing in BitConnect (a fraudulent crypto scam of 2017) would be a smart move.

Cryptocurrency BitConnect has grown from $10 to $471 in a few months.

All this happened because of the hype on the Internet. With an attractive website and good marketing campaigns, this seemed like a golden opportunity for the average investor to get rich quick. Unfortunately, as a result, the whole project became a scam, and investors lost millions of euros.  

How to do your research before investing in a project you don’t know yet

Doing proper research will reduce the likelihood of such situations occurring. But how to do that? What should you pay attention to?

What does the project solve?

Each team has its vision. While some projects seem futuristic, others aim to solve practical problems. The team’s idea and the situation’s solvability determine the project’s further development.

Several projects often try to solve the same problem with similar promises. Unfortunately, the parties behind these projects are competing companies such as Coca-Cola and Pepsi. Therefore, in times like these, it is essential to research all parties involved and choose the one that suits you the most.

For example, it can consider the following points:

• What solution does the project offer?
• What projects offer similar solutions?
• Which of these projects has the most significant potential?
• Does the team have evidence to support their claims?
• Remember that investing in relatively immature projects is always risky, especially if you are new to crypto investing.

Team

Be sure to study the team behind the project. For example, if Changpeng Zhao (CEO of Binance) suddenly launches a new project, it will testify to the high professionalism of the team. In addition, it can assume that the team members are qualified for the job. Experience is a critical factor in this innovative market. Therefore, it is worth paying attention to when examining the team behind the project:

• Who is leading the project?
• Who is on the primary team?
• What experience does the team have?
• Is their progress in line with the roadmap?
• How often do you update the project?
• Does the project have Github?

Conducting a team analysis will give you an overview of the team’s internal experience, vision, and history. In addition, it is highly recommended to check the career of an individual or a team member (it can do through LinkedIn or personal recommendations). In the past, scammers sometimes created “false identities” to gain the public’s trust. So when a crypto veteran backs a new project, it’s often a good sign.

Community

There is a close relationship between the number of users and the value of a cryptocurrency. Look at Elon Musk and Dogecoin, for example. Although Dogecoin was founded as a joke, by 2020, this coin’s importance had grown by more than 6700%. It was partly because entrepreneur Elon Musk actively promoted digital currency through various channels. In addition, the coin has a very active and friendly community, which has attracted a lot of attention.

A practical project that almost no one follows can indicate a risky investment. A strong community is essential because it provides familiarity, trust, and interaction.

However, as a general rule, when popularity rises, the price often moves with it. It can also be counterproductive. For example, if a cryptocurrency suffers a hack, it will immediately hurt the price.

Aspects of the community to look out for:

• People who invested in the project;
• Project advisors;
• Current partners and significant investors.

By carefully studying these aspects, you can understand whether the project has reliable connections in the industry in which it operates. Such information can give you more confidence in the competence and professionalism of the project.

Specifications

For many people, technical specifications are one of the most important factors when investing in crypto projects. If you decide to dive into this topic, pay attention to the following aspects:

• What does the white paper say?
• What blockchain is being used?
• Is the project decentralized?
• What is the tokenomics of the project?
• What are the network’s capabilities (staking, oracle, smart contracts, etc.)?
• What is the consensus algorithm of the project?

The above questions can give you a good idea of what the technical side of the project is capable of. On the other hand, information about the technical characteristics does not guarantee the coin’s authenticity.

Trend analysis

There are often clear trends in the innovation industry. For example, DeFi and NFTs have become extremely popular in recent years. Many of these projects have also delivered very high ROI. Therefore, studying market trends can be an exciting way to assess a project’s potential.

DeFi remains a popular trend, and investment in DeFi projects has skyrocketed in the past year. Reading information about it can help you find a good and innovative project.

Some popular ways to find trends:

• Broadcast news related to cryptocurrencies;
• Google Trends;
• Analysis of price charts;
• Checking crypto top 100.

DYOR

Since investing always comes with risks, there are certain factors that you should pay attention to before you get started. Understandably, many people have no idea where to start and what to look for.

Do Concept Your Research (DYOR) should always be a top priority when investing in lesser-known crypto projects. After all, it may be that a project has a good community but no solid technical specifications.

Studying the above factors often provides the best results. In any case, we hope that you have learned what to look out for after reading this article. We want to emphasize that there are always risks involved in investing, even when using this checklist.

Conclusions

Doing proper research will reduce the likelihood of choosing an unfavourable project for investment.

Consider the project’s proposed solution, which projects offer similar solutions, whether the team has evidence to support their claims, and which projects have the most potential.

Be sure to study the team behind the project. Aspects of the community worth looking at include people who have invested in the project, project advisors, current partners, and large investors.

Specifications are one of the most important factors when investing in crypto projects; study them as well.

Studying market trends and tendencies can help find a good and innovative project.

Always do your research and remember that any investment comes with risks.

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