What You Need To Know Before Buying Crypto As A High Risk Investor

If you have a high risk tolerance, then you can build an investment portfolio made up of 100% cryptocurrencies. If your goal is to realize a large return on investment as quickly as possible, then you can go in search of the Ether or the SOL of tomorrow.

For this, you need to do extensive research. Indeed, the best way to invest in the most promising cryptocurrencies is to discover the project before everyone else. For this purpose, Twitter is the most relevant medium and an essential tool to keep up to date with the latest news in this industry.

Researching Promising Cryptocurrencies on Twitter

To get the most out of Twitter, you need to follow cryptocurrency influencers. In order to select these influencers, you must also do your own research. You can ask yourself the following questions:

What interest does this person have in mentioning such and such a project?
Was he or she paid for this? Has this person ever talked about projects that have worked in the past?
Once you have selected the most relevant influencers according to your criteria, you must thoroughly explore the projects shared on their accounts.

Due Diligence To Know Which Cryptocurrency To Invest In

To ensure the viability of the project, you must carry out due diligence. Due diligence is a form of investigation that every reasonable person is expected to conduct before making an investment decision. Even if your risk tolerance is high, keep in mind that the world of cryptocurrencies is full of scams of all kinds. You are all the more vulnerable to it if you do not have the technical background necessary to detect these scams.

To perform your due diligence, you must start by going to the project's website. The first thing to do is to analyze the white paper. The white paper (white paper) is a document published by a crypto project in order to give information on the concept, the roadmap, the team behind the project as well as the tokenomics.

The most famous white paper is the one shared by Satoshi Nakamoto on October 31, 2008. Satoshi Nakamoto is the mysterious individual behind the creation of Bitcoin. His white paper is a 9-page document that basically explains what Bitcoin is and how it works.

Reading the white paper

To find out whether you should invest in a crypto project, you should go through this document carefully. This also applies to all documentation provided. You should start by looking at the technology developed by the team. Does this technology solve a particular problem? What is the scale of the problem being addressed? This first allows you to have an idea of ​​the size of the market in which the project will evolve.

Secondly, you should take an interest in the code. So, does the code developed by the team have particular specificities that ensure a competitive advantage? Then, you must study the use of the token. Does the proposed cryptocurrency have a use case or real life applications? If so, what are they?

Once you have answered these different questions, take a look at the roadmap. Do the different steps announced to achieve the objectives set by the team seem viable to you? Do you think these steps are achievable within the defined time frame?

Finally, and this is probably the most important part of the study of the white paper, look at the team behind the project. For this, you can go to the LinkedIn profile of the members and check out their past professional life. Have they ever been part of technological projects? If so, what were the results?

Note that you can also interact directly with the founders through social networks. From the white paper, it is easy to find the project's Telegram channel, Twitter or Discord. Thus, you can communicate with the team or the community. If you can't find social media, start questioning the seriousness of the project in question.

Potential partnerships are also another criteria to consider when performing your due diligence. Is the project supported by other companies? If so why? Can these companies support the project financially or technologically?

The Study Of Tokenomics

If after carrying out all these checks the project seems credible to you, it is possible that you have come across a promising cryptocurrency project. In order to be sure, you must now study its tokenomics.

Tokenomics is a portmanteau that includes token (token) and economics, literally meaning- the token economy. Tokenomics are data that will allow you to know how tokens will be issued and then distributed. The maximum quantity of tokens and the distribution of these are defined algorithmically from the genesis of the project.

For example, we know that there cannot be more than 21 million Bitcoins and that the issuance of these is halved every four years. So everyone knows the rarity level of this asset.

To study the tokenomics of a project, it is necessary to question the number of tokens available today and also the number of tokens available in total. You also have to enquire about the model for creating these tokens.

The three most common models are the disinflationary model, the inflationary model and the deflationary model. The disinflationary model sees a limited amount of tokens. This is the Bitcoin model for example. On the contrary, the inflationary model sees the number of tokens grow in a balanced way. This number of tokens generally increases depending on the use of the blockchain. This is the Ethereum model for example.

The deflationary model reduces the supply of the cryptocurrency over time. The goal is to prevent the market from being flooded with the asset in question while increasing its value. The more the supply of the token is limited, the more its demand increases and the more its value increases.

Deflationary projects use two main ways to achieve their ends. First, “buy-back and burn” is when the project buys back its own cryptocurrency to send to an address where the tokens cannot be retrieved. This decreases the number of tokens in circulation. This is for example the case of cryptocurrencies such as Cake or BNB.

The “burn on transaction” is when the smart contract specifies that the fees collected during transactions of the cryptocurrency in question will be automatically burned. The success of such a method relies on the trading volume of the token.

The number of tokens and their mode of issue are therefore good guides for assessing the future value of a cryptocurrency.

Due diligence is a long and tedious activity especially if you are a beginner and it requires a good knowledge of English, as almost all white papers are only available in this language.

Then, it is necessary to have some basic computer knowledge to assess the technological viability of a project. Finally, it requires some financial knowledge to study the economy behind the token.

You can of course acquire all his knowledge through careful study. Also, be aware that investing in cryptocurrencies that look promising to you can involve big risks.

You must ensure by yourself that the project in question is not a scam and that the developers will not disappear with the cash. This has been the case in the past and some fraudulent schemes have succeeded in fooling even the most seasoned investors.

In general, in terms of investment, two choices are offered to you: to seek it out yourself or to listen to the market. This second option consists of letting yourself be carried away by the flows because the market is ultimately the only price decision maker. If you want to pursue this option, I can advise you to follow specialists who have already proven themselves and have a track record of profitable investments.

Conclusion

There are different methods to invest in cryptocurrencies that you find promising. These ways differ depending on your investor profile and risk appetite. It is always necessary to do your own research and then find the right platforms in order to apply the chosen strategy.

Please be aware, however, that this entire article is in no way investment advice and you should always do your own research before committing your capital.

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