A Beginner’s Guide on Researching Cryptocurrency
Are you annoyed by hearing Do Your Own Research while asking for any investment tips in crypto? Then, This blog is for you to understand the steps to be followed while researching any cryptocurrency. The Crypto market is volatile and one needs to stay updated to avoid losses.
There are more than 8000 cryptocurrencies in the world. To decide or choose the right cryptocurrency is like picking a precious gem from the ocean.
Note:- I am not a financial advisor, I educate people about crypto and create awareness about it. So, always DYOR before investing in any cryptocurrency.
We will use a top-down approach to find the crypto which will provide us maximum returns.
1. Market Cap
Market Capitalization is one of the basic and easily available metrics for any cryptocurrency. The coins with a small market cap can increase 10X faster compared to the ones with large market caps. For instance, a coin with a 2M market cap can reach 20M much faster compared to a coin from 50M to 500M.
The top 3 platforms to track the market cap of any cryptocurrency is:-
My range for market cap while choosing a coin is between 5M to 10M. You can choose your range according to your research.
2. Trading Volume
Trading Volume helps us to determine how active a coin had been traded in the last 24 hours. The trading activity should be sound enough or else it can be considered as a dead coin. The 24h trading volume should be in the range of 10% to 50% of the Market Cap.
If you want to filter your researched data, you can create an excel sheet and copy the data from the coin market cap and paste it into the excel sheet. This will help you create your filters and apply them to the excel sheet.
Thus, the 24h Volume is an important metric to check the activeness of the coin.
3. Listing on Exchanges
Cryptocurrency Exchange is a marketplace where buying and selling of the cryptocurrency can take place. It is always important to check that the coin, you are looking for, is listed on which exchanges. If a cryptocurrency is listed on only one or two exchanges then try to avoid the coin. If the cryptocurrency is listed on an exchange with a large user base such as Binance, Coinbase, it’s a good sign.
You can check the listing of any cryptocurrency on CoinGecko.
4. Onchain Metrics
The Onchain metrics are used to determine the activeness of the users of the particular crypto. Sometimes, we can see there are a large number of wallet addresses linked to a coin but the active addresses are very few.
Onchain Metrics can be determined as:-
- The Ratio of the active addresses to the total addresses.
- The Ratio of the coins under the control of the community to the coins under the control of respective owners.
5. Development Monitoring
The best way to monitor the technological development in any project is by going through the Github Repo of the project. We can navigate through the insights tab to visualize the commits that are being made regularly.
You can also visit the issues section in the repository to have a look at the current discussions, bugs, or advancements going on in the project.
6. Team Research
The success of any project depends largely on the team who are working behind it. A good team consists of great developers, Marketing as well as Bussiness Managers. Always verify the credentials of the team by visiting their social media profiles such as Linkedin, Twitter, Facebook, etc.
7. Project Whitepaper
The whitepaper is the ultimate source of each and every detail about the project. Most of the researchers try to avoid reading the whitepaper. The reader doesn’t have to read the whole whitepaper. The reader can just go through the points mentioned below:-
- Protocol Consensus Method
- Technology Stack
- Interoperability of the Protocol
- Scalability of the Network
- Use Cases
- Project Roadmap
8. Community
Community is the most important part of any project. The community must be engaged and thoughtful to take the important decision about the project.
We can check the Telegram groups, Twitter handles as well as Discord servers of the project to check whether the discussion going on is thoughtful or baseless. If only memes and jokes are being shared, it shows the dark side of that community.
We should check whether in a community:-
- are thoughtful discussions going on?
- users engaged and interested?
- do they welcome new members?
- are they receptive to all questions?
Conclusion
Before investing in any cryptocurrency, it is essential to know every detail about the project. After researching all the above-mentioned points, one can come to a conclusion whether the project is worth investing in or just a scam.
You can also check the latest interviews of the founder or co-founder of the project to know the latest updates. Keep an eye on the headlines involving the coin or project you are researching about.
If you want to contribute to preparing learning resources, contact me on Linkedin and also follow our Linkedin page for the latest updates.
Mayank Bajaj:- https://www.linkedin.com/in/mayank-bajaj/
Prodigal AI:- https://www.linkedin.com/company/prodigal-ai
