Do your own research! That’s a disclaimer that most of our readers will see very often on social media and blog articles on other websites. It is often used because the author of a post seeks to avoid any liability about predicting the future outcome of a trade or recommending a token or a cryptocurrency. Aside from these attempts doing due diligence before making an investment seems to be a good idea. The only problem for beginners is the question of what they need to take into account as important or at least useful information.
While we will provide neither guidance nor advice for you on where to put your money, we like to introduce you to a couple of tools and methods that are considered to be valuable when doing your own research.
Start with the whitepaper
An obvious choice but nevertheless ignored by many beginners. A crypto project usually lays out its fundamental use-case and technical specifications in its whitepaper. Even with little or no knowledge and experience in crypto, it is a good place to start researching a project. It is usually publicly available on the project’s own website.
Take note of things that you don’t understand while reading it and then try to find answers by searching for more specific pieces of information on the internet or by tapping into the knowledge of the project’s community or even the developers. Many projects are run by start-ups and are mostly community-driven. This gives you the opportunity to get in touch with the person or the team that is responsible and ask them questions directly.
A whitepaper explains the fundamentals and plans of a crypto project. Once it has started and is delivering a product at an early or a later stage, success becomes measurable. The beauty of open and public blockchain technology is that it is transparent and accessible for all sorts of analyses. If you are tech-savvy you can try to check and evaluate data by yourself.
Even if you don’t have the knowledge, the skill, or the time to get the task done by yourself you can register for a variety of services doing the job for you. On-chain analysis has become increasingly popular when it comes down to evaluating the market and its current situation. How many addresses are in active use of a certain project? And how many of them are holding coins?
These are just two exemplary questions that might reveal interesting insights when researching a crypto asset. With more specific questions at hand, you can search for clues that might give you an edge in executing trades and making sound decisions.
Marketing vs. Reality
Our project will offer the same services like Uber but will be more successful because it’s on the blockchain! Does that sentence sound convincing to you? Every crypto project is doing marketing and in almost every case there is a gap between the promises of the marketing department and what a crypto-related product can actually achieve.
It is not important to point out that these gaps exist but to avoid investments where this gap is simply too huge to be overcome by the technology. Sometimes its isn’t easy to figure out if promises are too big and, in some cases, the potential of a technology is so huge that everything that is promised is in fact possible if and only if all other circumstances align.
Take the Sandbox as an example. The project has a partnership with Adidas which is one of the few big names that are going to enter the metaverse through a crypto project. Is it possible for other projects active in this field to attract big names and achieve the same or even better partnerships? Yes, of course, it is. But it is hard to predict which one will make the race and why a global player should choose this particular project over its competitors. Especially if you take into account that the metaverse isn’t a unified place but rather several different virtual sandboxes.
Who is who?
Another important factor is the team behind a cryptocurrency or a blockchain product. In some cases, the developers like to remain anonymous. Even the famous inventor of Bitcoin chose to preserve his or her privacy. Today there are only a very few exceptions where investors accept that the true identity of developers is unknown. Especially projects that related to privacy tech fall under this category.
In most cases, you will be able to check out who is involved and by using social media you can get a glance at a person’s expertise. The person in charge has a degree in art? Might be a bad idea if he is trying to reinvent supply chain management, but then again it can be the most valuable asset if the project aims to be the next killer application on the NFT market.
Qualifications and titles are not telling if a crypto project is going to be a success, but they might provide information about what to expect from the people carrying it.