How can I do my own research when investing?
DYOR stands for "Do Your Own Research." When it comes to researching cryptocurrency investments, there are a few key things to keep in mind:
- Understand the technology: Read the whitepaper and understand how the product works and what problem it is trying to solve.
- Look at the team: Look at the team behind the project and their experience and track record in the industry.
- Analyze the project's development: Look at the project's development progress and see if they are regularly updating their code and releasing new features.
- Review the community and social media: Look at the project community and social media presence to get a sense of how excited people are about the project and how well the team is communicating with its followers.
- Check the market sentiment and trends: Look at the overall sentiment and trends in the cryptocurrency market and see how they might impact the value of the specific project you're researching.
- Look at the current and historical charts, volatility and trading volume.
Always keep in mind that the crypto market is highly volatile and news and announcements can drive the market up or down, which is why DYOR and diversifying your investments are important.
1- Read the Whitepaper and understand what is all about
When it comes to understanding the technology behind a cryptocurrency, reading the whitepaper is a good place to start. A whitepaper is a document that provides a detailed overview of the project, including its goals, features, and technical specifications. The whitepaper should explain how the project works, how it is different from other projects, and what problem it is trying to solve.
It's important to understand the underlying technology that the project is built on, as well as any other technical details such as consensus mechanisms, smart contract capabilities, and privacy features.
It's also important to consider if the technology is unique, innovative, and have real use cases which can support the token value, and to check if it has any patents or trademarks.
Additionally, pay attention to the scalability, security and regulatory aspects of the technology and how well it handles these in the long run, especially as the adoption increases.
This can give you insight into its potential for success and its ability to solve real-world problems.
When researching a project/startup, it's important to take a look at the team behind the project. A strong team can be a good indicator of the project's potential for success.
Here are a few things to look for when researching a project's team:
- Experience: Look at the experience of the team members in their respective fields. Are they experienced in blockchain technology, software development, and business management?
- Track record: Look at the team members' track record in their respective fields. Have they been successful in their previous ventures?
- Advisors: Look at the project's list of advisors. Are they reputable individuals in the blockchain industry?
- Transparency: Look at how transparent the team is about their identities and experience. A team that is open about their experience and background can be considered more trustworthy.
- Communication: Check if the team has regular communication with the community, such as regular updates, social media presence, and community involvement.
- Development: Look at the development team size and structure, and whether they are dedicated to the project.
Keep in mind that a strong team does not guarantee success but it can give you more confidence in the project, a weak team can imply the opposite and increase the risk for the investment. Take into account that there have been cases where the team members have not been truthful about their identities and experience in the past, so it's important to be cautious.
3- Development updates
You should check the project's development at this point. A project's likelihood of success can be determined by how frequently new features are being developed and released.
When tracking the advancement of a cryptocurrency, keep an eye out for the following:
- Roadmap: See if the project is on schedule to reach its development milestones by looking at the roadmap.
- Codebase: Check the project's codebase to determine if new code and updates are consistently being committed. You can determine how active the development team is from this.
- Github and other development platforms: Some projects will put their codebase on Github and make it open source. You can check the activity on these platforms to get a sense of how the project is progressing and to see whether the codebase has undergone any substantial changes.
- Testnet or Mainnet: Many projects are currently in the development phase, therefore it's vital to check if there have been any testnet or mainnet releases. If so, this could be a sign that the project is progressing and may soon see the light of day.
- Partnerships and integrations: Examine the project's partnerships and integrations because they can give the technology practical applications and promote adoption.
- Announcements and communication : Keep an eye out for any announcements made by the project, such as press releases, blog posts, and social media updates, which can give you a sense of its current state of development and impending milestones.
4- Socials indicator
Have a sneak peak to the project's community and social media presence. The level of excitement and engagement within a project's community can be a good indicator of its potential for success.
Here are a few things to look for when researching a cryptocurrency's community and social media presence:
- Community engagement: Look at the project's community and see how engaged and active its members are. Are there regular community meetings or discussions? Are people excited about the project?
- Social media presence: Look at the project's social media accounts and see how active and engaged its followers are. How many followers does the project have on different platforms? Is there regular communication from the team?
- Telegram and Discord groups: Many projects have a telegram or discord groups, these groups can be a good way to gauge community sentiment and also get early information or updates from the team.
- Media coverage: Look at the project's media coverage, both mainstream and crypto-related. Are they being featured in reputable publications? Is there a positive sentiment towards the project in the media?
- Blogs and forums: look for mentions of the project on blogs or forums, this can give you an idea of the general sentiment of the community and also potential red flags or concerns.
- Events and meetups: Look if the project is regularly organizing meetups, events, or conference participation. This can indicate that the project is well-established and has a strong community.
5- Market sentiment
Become familiar with market developments and general sentiment around cryptocurrencies. Value of a particular token can be significantly impacted by market mood and trends.
When investigating the mood and tendencies of the market, keep an eye out for the following:
- Market capitalization: Consider the size of the cryptocurrency market as a whole and how it has evolved over time. You can use it to get a sense of how people generally feel about cryptocurrency (bear or bull market).
- Historical price: Examine the historical price of the particular token you're looking into to discover how it has evolved over time. This can help you get a sense of the coin's volatility as well as examine its trading volume, which is an excellent sign of the coin's demand and interest.
- Comparison with other cryptocurrencies: Evaluate a certain cryptocurrency by comparing it to other projects that are comparable to it. You can determine its relative strength or weakness in the market using this.
- News and announcements: Pay attention to recent news and announcements about the cryptocurrency market and particular projects because they can have a big impact on investor sentiment and a coin's value.
- Sentiment analysis: You can use platforms and tools to carry out sentiment analysis, which looks at people's feelings—such as whether they are afraid or greedy—about the market.
6- Historical Data (volatility, volume, price, liquidity, TVL)
Now take a look at the current and historical charts, volatility, and trading volume. These factors can give you an idea of the coin's performance and how it is currently being traded.
Here are a few things to look for when researching a cryptocurrency's charts, volatility, and trading volume:
- Charts: Look at the current and historical charts of the specific cryptocurrency you're researching. This can give you an idea of the coin's price history, volatility, and trends. Candlestick charts, which are a common way to represent the price action, can be useful to understand the volatility and the price trend.
- Indicators: You can use technical indicators to analyze the charts, such as moving averages, RSI, Beta, VaR and MACD. These indicators can help you identify trends, momentum, and potential buy or sell signals.
- Volatility: Look at the coin's volatility, which is a measure of how much the price of a coin fluctuates. High volatility can be a good thing for traders looking to make quick profits, but it can also be risky for long-term investors.
- Trading volume: Look at the coin's trading volume, which is a measure of how many coins are being bought and sold. High trading volume can be a good indicator of demand for a coin, but it's also important to note that large trading volumes do not always indicate a healthy market, it can also be an indication of manipulation and wash trading.
- Liquidity: Look at the coin's liquidity, which is a measure of how easily you can buy and sell the coin without affecting the market price too much. Liquidity is important to consider because it can impact your ability to enter or exit a position.
- TVL: Total value locked is a critical metric for assessing the popularity of a protocol.
It's important to note that cryptocurrency is speculative and not suitable for all investors, you should always ensure you have a good understanding of the investment before putting any money in.