Jul 21, 2020
Doing your own research? Making the right choices in cryptocurrency investments
By Agbo Joel on The Capital
Most cryptocurrency suggestions end with the common phrase, ‘Do your own research’(DYOR). To an extent, I see it as the best way to describe the unpredictable nature of everything about the crypto space, every ‘advice’ are mere suggestions and even the ‘professionals’ get it wrong many times. Getting it right most times is even an extremely hard feat. Getting it right every time is utterly impossible, a 70% accurate cryptocurrency advisor is just an illusion, 50% accuracy is almost impossible too, as a matter of fact.
Predictions in cryptocurrency are mere speculations, hence the phrase ‘Do your own research’ charges you to be a master of your own decisions and as well bear the repercussions of its failure, and as well, the returns of its success. While these rampant suggestions also form a part of your research resources, their influence on your final decisions is actually your liability as the influencers do not answer for the failure of your decisions.
Hence, you re literally ‘on your own’. Looking for that future cryptocurrency gem to invest in? it actually sounds easier than it really is, despite the fact that it already sounds tough. Just as experienced investors will say, ‘make your decisions and stand by it’. Predictions of any kind are 10% calculation and 90% luck. Getting lucky is the only way to get it right, getting lucky is not assured, unfortunately.
Scoring high chances of getting your speculations right and getting positioned closer to being the lucky one in your cryptocurrency investments involve some vital steps of calm inquiries, researches, and calculations to arrive at a higher probability of making the right choice. The cryptocurrency space is made up of over five thousand ‘exciting’ projects and new projects coming up every day with equally exciting concepts and clever moves, one will be moved to invest in almost all of them.
Regardless of how much you diversify your cryptocurrency portfolio, you still leave out majority of the cryptocurrency projects, and each one you leave behind reduces your probability of getting it right with your investment as every one of them stands some chances of making good returns on investment. On the other hand, doing the impossible and buying into as many projects as possible also places you at a higher risk of running into losses, diversification may seem to be the best approach, but in the real sense, it could backfire badly. Streamlining your investments still harbors the bigger risk but is poised to give the best return if you get it right with your streamlined portfolio.
Bitcoin maximalists would say ‘just buy bitcoin and stay safe,’ ethereum enthusiasts portrays ethereum as the future of the internet and the next project poised to give outrageous returns. Other altcoins are also designed to look as flashy as possible. Investors are always left with a dilemma and making the right move is just one click away from them, as well as making the wrong move.
Decisions backed by researches are the best approach, making the right enquiries in the course of your research hence becomes equally important. In making your researches, some important aspects of the project should be surveyed carefully. Short term holders and traders certainly have a ‘smaller’ decision to make. Traders could derive their next moves by looking at the seven (7) days price chart of the coin/token and predict the next move by other buyers using human behaviour theories. This is very hard, however, investors intending to hold on to their investments for a long time certainly have a harder decision to make as there comes to need to apply the traders’ and short-term holders’ strategies and as well many other calculations and speculations to arrive at a safer decision.
Just like stocks, gold, and other similar commodities cryptocurrency price movements depends on market trends and the utility of the token. While short term holders and traders can simply ride with their predicted market trends and take their profits in a short while or simply get out of the trade to minimize their loss, long term holders expect to hold their tokens/coins for a much longer time, ride with the fluctuations and stay through the adverse times hoping to reap from their persistence and patience at the long run. Hence, careful prediction of the long future is essential.
The idea behind a cryptocurrency project is the first thing to consider. Many cryptocurrencies are a mere statement of bogus terms with infeasible proposals and technological concepts which are not realizable. Jumping into such projects is sure to backfire in the long run. Utility is the first tokenomics to look out for. How possible is the concept proposed by the developers? What are the possibilities of developing their proposed solutions into workable prototypes? and what are the possibilities of these prototypes being really applicable to the problem which it hopes to solve?
A project which offers real solution to the problem it hopes to solves stands more chances to make massive returns on investments if it finally proves to be a solution. Unfortunately, many cryptocurrency projects make their proposals as flashy as possible and present mouth-watering roadmaps which all end up being mere proposals which may never be realized. Sieving out such projects hence requires an in-depth look at current efforts made by the developers and how workable their current prototypes are. This will give a better insight into the future and enable the investor predict the future with more information.
No matter how feasible a proposal is, it requires a capable hand to materialize it, a capable team is also a vital factor to consider before any cryptocurrency investment. How experienced and qualified team members are increases the chances of the project’s success. A good team is as important as a feasible goal. A good team knows how best to steer a project towards the right path. Before investing in any cryptocurrency project with a good vision, endeavor to survey the team's reputation, experience, qualifications, past projects, and leadership scheme. A well-guided project with a good proposal is bound to succeed if other factors should remain favourable, this is also a good point to consider before buying in.
Token generation and distribution scheme could also go a long way to deciding the success of a cryptocurrency project. Outrageous supply scheme scares away investors. Token distribution scheme is also a good factor to consider, who are the holders of this coin/token? And how many tokens are they holding? How many tokens are already in circulation and what is the total supply? Unexplained outrageous supply and distribution of tokens/coins are major red flags. In practice, a project with a good team and potential utility may override poor token management, however, in a situation where the first two factors are not very satisfactory, risking it more with a poor token supply and distribution scheme is a whole lot of risk.
A look into the community and how the project is being managed is also important. A transparent and decentralized project displays the core virtues of a cryptocurrency project. A good community contributes tangibly to the success of a good project, building a good community is also dependent on how good the management is. A well-managed transparent and truly decentralized project appeals to the cryptocurrency community more than otherwise.
Having taken these factors into consideration with the future in mind, an investor stands a greater chance of making a good decision, it becomes more important as the expected holding time increases.
Originally published at https://www.publish0x.com.
