Cryptocurrencies have exploded in popularity with the advent of Bitcoin’s blockchain technology. Thousands of cryptocurrencies are in existence, and new ones are created daily. With so many choices out there, it is difficult to know which ones are legitimate and which ones are fraudulent.
No longer must we rely on a third-party to ensure transfers of money as financial sleazeballs put their grubby hands all over our economic livelihoods. Their cut is always a percentage better kept in our own pockets. Our hard-earned income deserves to be invested into the very best of projects that will return more money than what we first strived to save. The following tactic I’m about to share is extremely uncomplicated, is essential for any kind of risk mitigation you should employ when investing your money anywhere, and focuses on the proven method of research.
Many people strive to obtain Bitcoin as it was the pioneering cryptocurrency to bring our attention to the possibilities of the blockchain and has a limited supply. A common misconception amongst people who don’t yet understand blockchain technology is that one must purchase the whole Bitcoin. What they fail to realize is that Bitcoin can be acquired in tiny increments known as a Satoshi, or more accurately, one hundred millionths of a Bitcoin.
One Satoshi, at the time of this writing, is equal to $0.0000363085. However, investing in a measly portion of a Bitcoin seems too conservative for some of us wanting to make supplementary income from cryptocurrencies.
I would venture to say that most of us cannot flat out buy a few whole Bitcoins especially those looking to make an entry into investing in cryptocurrency. Well, you can’t go wrong with investing in Bitcoin as it is known as “digital gold.” But, no risk, no reward holds true — how can one expect to increase their investment substantially by taking the easy road?
This is why I would suggest branching out and doing research on other projects that offer other features than what Bitcoin offers. DYOR or “do your own research” as it’s known in the crypto world can help you weed out the projects that provide close to nothing or those that really don’t have any use-case at all. The following approach is not an all-inclusive list of every detail one needs to research when looking to invest in cryptocurrencies, but it is a good start:
- Begin at the cryptocurrency's web page — this is the central point of all official documentation one will need to get a good grasp on the project’s legitimacy. Web pages are difficult to determine whether a crypto project is legitimate since anyone these days can throw together a website.
- White paper — the white paper is the official documentation of a project letting investors know what the project aims to do and what problem(s) it endeavors to solve. Usually, there is a link on the project’s website to the white paper and if there is no white paper, steer clear and move on to the next project. If there is a whitepaper, and the writing sounds like empty promises spouted by politicians on the campaign trail, direct your time elsewhere. I have noticed with some research that some projects with masternodes will really emphasize on the money-making potential of their masternodes — this is another sign to run for the hills and look for firm ground to stand upon since a good deal of these projects pull exit scams. I am not saying that all masternode cryptocurrencies are dishonest. Many of the top-tier coins (high market cap), typically forked from Dash, are authentic as they use the nodes to support their network. Another tip on the whitepaper, usually the more technical, the better. These are the whitepapers that look like a scientific peer-reviewed journal publication, use Bitcoin or Ethereum’s whitepapers for reference. Not all of these types of whitepapers are valid either; however, the projects that really aim to implement a solution, a real use-case, have new technology to bring to the table and this new technology warrants a scientific explanation.
- Team section — this is usually another go-to link within a project’s website. Now there are questions of anonymity since this is one of the underlying principles of blockchain technology, but honestly, if a project doesn’t display their team members, I wouldn’t give it a second thought unless you are looking at a big-name privacy coin that has already been listed on the large exchanges.
- Social media — this one, in my opinion, is the most time intensive. If you click on the links to the social media platforms and see nothing but “when moon” or “when lambo” on the project’s social feeds, I would vacate immediately as the project is probably a scam, especially if the core team members are the ones saying these things. If the core team members are active, speaking about development in an intelligible way, and attempting to answer relevant questions to the best of their ability, I would put this check in the box and move on to the next area of investigation: the coding.
- GitHub — this site is where cryptocurrency projects post their code, updates, and wallets for the community to download to support their project’s development. If there are few “commits,” little entries, hardly any details, or no GitHub at all, get out and never look back. Otherwise, this is an excellent place to really get to know the ins and outs of a project as their software and imperative programming are displayed here.
- Coinmarketcap.com (CMC) delivers all kinds of information regarding cryptocurrency projects and exchange details. Links to all the sites mentioned above are usually listed on CMC. Rankings of leading cryptocurrencies are displayed on CMC and another critical topic that has not been discussed yet, charts.
- Charts — Before crypto, I didn’t have much use for charts, but now, they are an essential tool needed to see how the economics of a coin are behaving and performing. Serious expertise in technical analysis (TA) isn’t necessary to get an idea of what a coin is about to do particularly those with extended histories to compare. There are many masters and other crypto influencers out there who can teach you how to predict what a cryptocurrency is going to do based on its chart. A quick Google or YouTube search will bring up copious results that can give you a good foundation with some of the elementary concepts such as Bollinger Bands, Stochastics, RSI, MACD, and all sorts of other TA tools.
- An important note regarding charts is history. If a coin is new, it’s chart will only show a few days or so and this is a good sign to hold off on any kind of investment. Usually, when a coin is first introduced to exchanges, those who already hold the coins, such as team members or initial investors, dump off their share to gain profit, and if you have just purchased the coin, you will lose a significant amount of value very quickly.
This list is simplistic, but it is necessary to go through these items to, first of all, give you an idea of what the cryptocurrency aims to improve, and second of all, if the project has a single shred of legitimacy. If you have looked into all of these and they have your approval, it would be alright to begin thinking about investing or time to move onto a more thorough investigation.
This information is not financial advice but research advice — I am not a licensed financial advisor however I have a few years of experience investing in cryptocurrency and researching the complexities of blockchain projects. When you do go to invest, remember not to spend more than you can afford to lose and try to use consistency towards your advantage.
For example, investing $20, $50, $100 or whatever you can afford per month of Bitcoin, Ethereum, Litecoin, or another cryptocurrency you have researched thoroughly and believe has a solution to a real problem, improves upon another solution, or makes our lives easier in some way. Just remember these three key concepts:
- Don’t spend more than you can afford to lose
- Look for projects with products that are actually useful
- Diversify your portfolio — “Don’t keep all your eggs in one basket.”
Right now is a great time to get in early while the market is down and every cryptocurrency is at a bargain price. Don’t wait until the bull market returns and for regret to overpower your emotions as you think, “Great, I should’ve gotten in earlier!” Listen to the market sentiment of those who have been around for a while — the Crypto Influencers leaning toward the bear market or the bull market, but be careful about following their investment advice into specific coins because many of them are paid to advertise or “shill” through social media posts. Common sense should prevail in this space, but often, we must read between the lines.