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How to Evaluate Cryptocurrency Projects Before Investing? Key Metrics and Tools
Meta Description: Here’s how to evaluate a cryptocurrency project before investing. The steps below include key metrics, tools, and red and green flags in a new project
The best way to evaluate a new cryptocurrency project is to first check the whitepaper. The best projects out there have a vision, they address problems, and a detailed roadmap. They also have a team of developers and an involved community.
Here’s how to evaluate a cryptocurrency project before investing. The steps below include key metrics, tools, and red and green flags to look for when you consider investing in a new project.
Explore the Project's Website
A worthwhile crypto project always has a detailed and user-friendly website. This is where to start your evaluation – visit the project’s website and look for the following details.
👉Current information – a reputable project will have its info up-to-date. Outdated information and bad website navigation can be considered a red flag and you should stay away from such projects.
👉Brief information on the developer team (the more, the better) – the project’s website has to contain information on the team. Look for detailed information on both the developer team and the project’s management.
👉Goals of the token – The website should clearly state the objectives of the project. Reputable crypto projects solve specific problems and carry certain value propositions.
Review the White Paper
All reputable crypto projects must have a white paper. The white paper provides information on the coin’s objective and technical details on the blockchain and its role. The best white papers contain industry-specific terms that are most familiar to developers and language data scientists.
Most importantly, the white paper states the utility of cryptocurrency and the problems it is aimed at. The finest white papers pinpoint a specific problem, define how the token will function and how it will solve the aforementioned problem through blockchain. This has to be presented in a clear manner for the investors to understand.
Examples of white papers
As in every industry, there are good, bad, and purely crazy examples of white papers. Here are a few examples:
The good one – Solana
Solana is one of the success stories on the crypto market. This can be attributed to the project’s detailed white paper – it contains info on how the project works and its utility.
The bad one - Bananacoin
On the other hand, Bananacoin is a famous bad example. A classic crypto scam, the now defunct project offered tokens in exchange for money, that was supposed to fund a banana farm in Laos. The farm was supposed to provide bananas for its investors.
The crazy one - Cybertruck
Cybertruck is a meme coin and its team doesn’t take it too seriously. The project had a flashy website with a disclaimer on the bottom. It stated that:
"$CYBERTRUCK is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. The coin is completely useless."
Advisory Board and Project Support
The advisory board, project partners, and support are another crucial factor to consider. This information can carry valuable insight into the project’s quality and professionalism. The best projects tend to form partnerships with industry leaders, and companies, outside of the blockchain space. Their funding comes from reputable sources, like VCs (venture capitals).
Examples
A good example here is Pantera Capital. It was formed in 2013 and is the first crypto fund in the USA. Pantera invested in many successful projects and tools that formed modern blockchain.
Other well-known VC funds to look out for include Andreessen Horowitz (a16z), the Digital Currency Group (DCG), Fenbushi Capital, and countless others!
Examine Market Metrics
The market metrics can give you reliable information on a token’s performance and potential. The best way to examine the market metrics is through conducting research, and reading financial blogs, news, and developments.
When evaluating new projects and future investments, take the following metrics into account:
Trading volume
Trading volume measures the levels of investment activity in a token. The higher the trading volume – the greater liquidity and stability.
Supply metrics
The token’s supply metrics usually consist of the circulation and the total supply. A good understanding of these metrics will impact the coin’s value and future price potential.
Token ratings
The token ratings include various metrics for cryptocurrencies such as Token Metrics and TokenInsight. They provide information about the prospects and the risks that a particular coin carries.
Study Price History
You need to analyze a token’s price history before investing. This analysis w can provide data for the coin’s volatility, past performance, and overall trajectory. Although, past performances are not indicative for future results, knowing a token’s price trends can aid you in making better investment decisions.
Look for steady price raises, and avoid spikes and sharp declines as much as possible.
Monitor the Project's Progress and Roadmap
Investing is a process, not a single event. You need to monitor the progress of the project, as well as its development. This means conducting regular checks on the project’s roadmap and its milestones if it is meeting its objectives.
Monitor social media, too. Stay up to date with announcements and updates. A transparent team, valuing good communications, is one of the brightest green flags a project can have!!
How to Avoid Cryptocurrency Scams
Due to their high market value and overall popularity, cryptocurrencies can be used by scammers and other ill-intended folks. However, spotting a crypto scam can be easy with the following tips (just remember to stay vigilante):
Never Share Your Information
Members of the team – developers, managers, as well as exchange representatives or other users will never ask about your personal information, keys, or other sensitive data.
Use Regulated and Reputable Exchanges
Decentralized exchanges carry a certain risk by providing connections to others without asking for any personal information. This risk isn’t present with centralized and regulated exchanges. They aren’t 100% safe too, but they vet the tokens they list.
Beware of Social Media
Scammers love social media, as it gives them quick access to targets. Avoid contacts regarding new crypto projects, as they are almost certainly a scam. Exchanges and legit users use other means of communication.
In conclusion
The best way to evaluate a cryptocurrency project before investing is to analyze all the available information on it. That way you’ll be able to determine why is priced that way, is it safe and legit, and generally – worth your investments.
That way, your best tool is to assess all available information. Keep an eye on technology and the process behind it, thus gaining insight into the market!
Frequently asked questions
What is the first step in evaluating a new cryptocurrency project?
Check the project’s website and look for detailed and updated information on the team, the project’s goals, and its milestones.
What are some red flags to watch out for on a project's website?
The most common red flags are outdated information, bad navigation, and the lack of details on the team.
Which market metrics should be considered when evaluating a cryptocurrency?
The most important metrics include, but are not limited to trading volume, supply metrics, and ratings from platforms like Token Metrics and TokenInsight.
#BlockchainAnalysis
The best way to evaluate a new cryptocurrency project is to first check the whitepaper. The best projects out there have a vision, they address problems, and a detailed roadmap. They also have a team of developers and an involved community.
Here’s how to evaluate a cryptocurrency project before investing. The steps below include key metrics, tools, and red and green flags to look for when you consider investing in a new project.
Explore the Project's Website
A worthwhile crypto project always has a detailed and user-friendly website. This is where to start your evaluation – visit the project’s website and look for the following details.
👉Current information – a reputable project will have its info up-to-date. Outdated information and bad website navigation can be considered a red flag and you should stay away from such projects.
👉Brief information on the developer team (the more, the better) – the project’s website has to contain information on the team. Look for detailed information on both the developer team and the project’s management.
👉Goals of the token – The website should clearly state the objectives of the project. Reputable crypto projects solve specific problems and carry certain value propositions.
Review the White Paper
All reputable crypto projects must have a white paper. The white paper provides information on the coin’s objective and technical details on the blockchain and its role. The best white papers contain industry-specific terms that are most familiar to developers and language data scientists.
Most importantly, the white paper states the utility of cryptocurrency and the problems it is aimed at. The finest white papers pinpoint a specific problem, define how the token will function and how it will solve the aforementioned problem through blockchain. This has to be presented in a clear manner for the investors to understand.
Examples of white papers
As in every industry, there are good, bad, and purely crazy examples of white papers. Here are a few examples:
The good one – Solana
Solana is one of the success stories on the crypto market. This can be attributed to the project’s detailed white paper – it contains info on how the project works and its utility.
The bad one - Bananacoin
On the other hand, Bananacoin is a famous bad example. A classic crypto scam, the now defunct project offered tokens in exchange for money, that was supposed to fund a banana farm in Laos. The farm was supposed to provide bananas for its investors.
The crazy one - Cybertruck
Cybertruck is a meme coin and its team doesn’t take it too seriously. The project had a flashy website with a disclaimer on the bottom. It stated that:
"$CYBERTRUCK is a meme coin with no intrinsic value or expectation of financial return. There is no formal team or roadmap. The coin is completely useless."
Advisory Board and Project Support
The advisory board, project partners, and support are another crucial factor to consider. This information can carry valuable insight into the project’s quality and professionalism. The best projects tend to form partnerships with industry leaders, and companies, outside of the blockchain space. Their funding comes from reputable sources, like VCs (venture capitals).
Examples
A good example here is Pantera Capital. It was formed in 2013 and is the first crypto fund in the USA. Pantera invested in many successful projects and tools that formed modern blockchain.
Other well-known VC funds to look out for include Andreessen Horowitz (a16z), the Digital Currency Group (DCG), Fenbushi Capital, and countless others!
Examine Market Metrics
The market metrics can give you reliable information on a token’s performance and potential. The best way to examine the market metrics is through conducting research, and reading financial blogs, news, and developments.
When evaluating new projects and future investments, take the following metrics into account:
Trading volume
Trading volume measures the levels of investment activity in a token. The higher the trading volume – the greater liquidity and stability.
Supply metrics
The token’s supply metrics usually consist of the circulation and the total supply. A good understanding of these metrics will impact the coin’s value and future price potential.
Token ratings
The token ratings include various metrics for cryptocurrencies such as Token Metrics and TokenInsight. They provide information about the prospects and the risks that a particular coin carries.
Study Price History
You need to analyze a token’s price history before investing. This analysis w can provide data for the coin’s volatility, past performance, and overall trajectory. Although, past performances are not indicative for future results, knowing a token’s price trends can aid you in making better investment decisions.
Look for steady price raises, and avoid spikes and sharp declines as much as possible.
Monitor the Project's Progress and Roadmap
Investing is a process, not a single event. You need to monitor the progress of the project, as well as its development. This means conducting regular checks on the project’s roadmap and its milestones if it is meeting its objectives.
Monitor social media, too. Stay up to date with announcements and updates. A transparent team, valuing good communications, is one of the brightest green flags a project can have!!
How to Avoid Cryptocurrency Scams
Due to their high market value and overall popularity, cryptocurrencies can be used by scammers and other ill-intended folks. However, spotting a crypto scam can be easy with the following tips (just remember to stay vigilante):
Never Share Your Information
Members of the team – developers, managers, as well as exchange representatives or other users will never ask about your personal information, keys, or other sensitive data.
Use Regulated and Reputable Exchanges
Decentralized exchanges carry a certain risk by providing connections to others without asking for any personal information. This risk isn’t present with centralized and regulated exchanges. They aren’t 100% safe too, but they vet the tokens they list.
Beware of Social Media
Scammers love social media, as it gives them quick access to targets. Avoid contacts regarding new crypto projects, as they are almost certainly a scam. Exchanges and legit users use other means of communication.
In conclusion
The best way to evaluate a cryptocurrency project before investing is to analyze all the available information on it. That way you’ll be able to determine why is priced that way, is it safe and legit, and generally – worth your investments.
That way, your best tool is to assess all available information. Keep an eye on technology and the process behind it, thus gaining insight into the market!
Frequently asked questions
What is the first step in evaluating a new cryptocurrency project?
Check the project’s website and look for detailed and updated information on the team, the project’s goals, and its milestones.
What are some red flags to watch out for on a project's website?
The most common red flags are outdated information, bad navigation, and the lack of details on the team.
Which market metrics should be considered when evaluating a cryptocurrency?
The most important metrics include, but are not limited to trading volume, supply metrics, and ratings from platforms like Token Metrics and TokenInsight.
#BlockchainAnalysis
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.