Mar 1, 2022

8 min read

How To Research Crypto Projects To Invest in

You’ve been hearing about cryptocurrencies, or at this point, you’ve done more than hearing and have bought some crypto but you keep losing money or seem not to be making as much money as you intended. Well, I was just like you, and after surviving a few rollercoaster rides with the crypto market, I now have a Ph.D. in crypto-market analysis lol!

Here are a few things I wish I knew when I was starting out.

NB. This is no financial advice.

There are probably 8 factors you need to look at when talking about, and/or looking to put money behind a crypto project.

1. What: What are they, what do they do? Keep it at a very basic level. Just simplify it. I really like the K.I.S.S acronym, meaning Keep It Simple Stupid!

Examples are:

Bitcoin = Peer-to-peer electronic cash system.
Ethereum = Smart contract & Decentralized App platform.
Dogecoin = Meme coin.

A good resource to use is the “whitepaper” of these crypto projects and also their websites.

Here is Ethereum’s yellow paper and my walkthrough of it.

These two resources tell you exactly what they are trying to do and outline basically all of their intentions. This is like their sales pitch to the world. On their website, they should also have an about page, a mission statement, etc…

You also want to go to forums such as Reddit, Twitter, LunarCrush, etc to find out more about the project. Basically, what you’re trying to do is get as much information such that you can easily explain it to a 5years old. You want that 30,000ft birds-eye view of the project.

2. History (a.k.a Background): Who is on the team i.e creators and developers? What have they done, how long have they been around? You want to have answers to these questions.

Let’s take this example from Cardano (ADA).

Founder: Charles Hoskinson (Co-founder of Ethereum, CEO of IOG).
The project began in 2015, Took place in Asia, Funded through an ICO that took place 2015–2017 in four stages.
The currency debuted with a market cap of around $600 million.
Hoskinson had a falling out with Ethereum’s co-founder Vitalik Buterin because he wanted to make ETH for profit, but Butterin did not. So Hoskinson decided to make his own project which is Cardano (ADA).
Cardano is a “proof-of-stake” smart contract platform that wants to allow “innovators and visionaries to bring about a positive global change”.

3. Sector: Below is a Bitcoin (BTC) dominance chat to help simplify this. This tells us what is bitcoin’s market cap vs the entire industry market cap. In March 2017 the market cap of bitcoin was 95% of the entire market cap of the cryptocurrency market. Bitcoin essentially dominated everything. Whatever bitcoin did, basically everything else followed. 4 -5 years later it is only at 40%, and 3–4 years from now, it is only going to continue to drop. That doesn’t mean that Bitcoin’s market cap is going to drop, but the hold that it has on the entire cryptocurrency space will start to diminish as we have more good crypto projects gain a strong foothold.

a chat showing bitcoin’s market dominance in 2017 and 2022.

When we talk about sectors, these are not everything but these are the big ones.

L1 (Layer One): These are Ethereum, Avalanche, Cardano, Solana, Phantom
L2 (Layer Two): These are scaling solutions mainly for Layer1. L2 is for things that L1 can’t do by themselves. And the biggest L2 currently is Polygon (MATIC).
Utility: These are kind of decentralized and centralized exchanges. Uniswap, Sushiswap, Binance etc.
Defi: These are defi protocols, such as terra luna, aave, curve
Meta: Anything that has to do with the Metaverse, play-to-earn games, etc

Breaking these projects into sectors helps to understand the peculiarities existing in each sector, how they play into the entire crypto space, and each sector’s potential for growth in the future.

4. Value: What value are they bringing, how are they different and better than other crypto projects, Why are they worth investing in over other crypto projects? You want to find satisfiable answers to these questions. Because if all they do is slap on a different logo, a different name and they do exactly what another crypto is doing then they are not any better than others, they are just different in their marketing so why not just go with the O.G.

Examples of O.Gs are:

Bitcoin: The real O.G
ETH: First Smart Contract Platform
Polygon (Matic) : #1 ETH scaling solution
Luna: Unique stablecoin ecosystem
ChainLink: Connects the real-world data with the blockchain

Also, what are the other things aside from the cryptocurrency: are you able to stake it, what are their liquidity pools, delegating, yield farming?

You want to know if this crypto is doing something others are not, cannot, or will find it very difficult to do. If there is, then that gives people a reason to invest in this crypto project vs another.

Important factors to take into consideration are:

Inflationary: is it inflationary or deflationary meaning are they going to continue to make more tokens? And if they are, for how long and how many? For example, Bitcoin is inflationary as they are going to keep mining new blocks and minting new currencies until 2140, which afterward, there won’t be anymore minting/mining. At that point, it becomes deflationary.
Tokenomics: Basically a crypto way of saying the economics of a cryptocurrency token i.e ‘The economics of an asset’.
Liquidity: You can go to coinmarketcap to see a lot of these metrics/stats just by clicking on any cryptocurrency you’re researching.
Market Cap
Max Supply
Total Supply
Circulating Supply
Trading Volume (24h)

Liquidity > MarketCap

Liquidity is a measurement of the ability to buy and sell a particular asset at its current fair market value.
Liquidity is harder to manipulate compared to market cap
For new projects, the creators and developers will usually “lock” liquidity into the project to allow new traders to trade and use the crypto/token without huge frequent price movements. This also shows that the developers are putting their money where their mouth is, and this should provide some confidence to new people.

5. Ecosystem: Where are they building, who are they partnering with, what are they doing? The question to ask is, what is your crypto doing “outside” of itself? Important things to look at are:

Partnerships: What partnerships are they doing in & out of crypto?
Social media: Everyone has a social media account, so your cryptocurrency better have one!
Growth: How are they growing their ecosystem and their networks? Ethereum’s ecosystem has grown the most, but a really fast-growing one is Solana.

6. Risks: This one is pretty simple but super important!

Are there any major red flags?
Basically, if all the above important factors are not met and satisfied by you, then is it really worth investing in?
Ask yourself, can I see millions of others using and investing in this?
Try to make an investment look bad, if it’s very easy to do, then move on. If it’s hard to make a crypto project look bad then you might be onto something.
Be objective. As much as you want to get into a crypto project because it has 100,000X potential, you need to look at the data, numbers, and what’s really going on with the crypto.

7. Predictions (for price): There’s really no right or wrong way to do this. Just don’t try to be too ‘optimistic’. Because if you try to shoot for the stars, and land on the moon, you’re going to be disappointed!

Here are some ways on how to determine future price;

Technical analysis.
You want to compare market caps of your crypto to other top cryptos in the market (i.e Fantom — > Bitcoin), if it’s doing better then that proves the saying “more risk more reward”, but if it’s doing worse, then it doesn’t make sense to take on more risk for less reward.
% Dominance of Entire crypto market cap: A good example is, if Solana has 3% of all the market cap in crypto, what would be the price if the market cap for all crypto was $20 Trillion.
What are other notable people saying about the project?
What sector is it in, is the sector supposed to grow a lot in the future? For example, a sector like the metaverse is supposed to grow a lot in the next 5–10 years.
Prepare for the worst, hope for the best!

FINAL THOUGHTS

How long do you plan on holding this crypto?
Do you like it because of what it offers or is it just a good way to make a lot of potential money?
What will you do if the project does not grow as fast as you want it to or it starts to lose value over time?
Most importantly, and at the end of the day, you should just be thankful for being part of this crypto revolution. It is like participating at the beginning of the internet all over again, and this presents so many opportunities.

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How To Research Crypto Projects To Invest in

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