Today, cryptocurrencies open a plethora of opportunities to different groups of people. Some prefer to invest in crypto, hoping to get profits.
Others benefit from alternatives to institutional services, such as crypto loans. Nevertheless, one of the most popular ways to use crypto is to invest in it.
Many wonder how to find promising cryptocurrencies that would increase in value like Bitcoin once did. This article answers the question of how to research crypto to find promising investment opportunities.
Read The Whitepaper And Project Documentation
Start your crypto research process of a chosen cryptocurrency by reading its whitepaper and project documentation.
You can find the whitepaper on the official website of the project. Usually, it’s easy to find this document as teams ensure to make it accessible.
The whitepaper describes the coin’s purpose, technology, and objectives. Look for new ideas, real-world problems it hopes to tackle, and market effect. Examine the roadmap and the project’s future vision for clarity.
It’s important to find a legal project that complies with all recommendations and laws, such as AML. What is AML?
It’s an anti-money laundering procedure that all crypto projects must follow. You may even find a section about the compliance of the project in the whitepaper.
Examine The Team
The next step in this step-by-step crypto research is checking the team’s background. Examine the team’s experience, qualifications, and previous projects.
A solid and trustworthy team can boost the crypto’s chances of success. Check whether they have a visible and active presence in the community and on social media. A trustworthy team instills confidence and trust in investors.
Learn About The Use Case And Utility
When you research cryptocurrencies, you must understand the use case of the researched coin or token. This factor determines whether the chosen crypto has adoption potential. Determine whether it solves a realistic problem or performs a specific function.
Check whether it has any distinguishing features or benefits over other cryptocurrencies in the same segment. A clear and valuable use case boosts the coin’s acceptance and growth potential. To determine the coin’s long-term prospects, consider its real-world demand and utility.
Learn About The Community And Social Media Presence
Find a cryptocurrency community and learn whether the project has a social media presence. Communities that are engaged and supportive of the coin can increase its popularity and adoption in the future.
Seek the crypto project’s community on popular forums and within active social media groups. That’s how you can determine the level of interest and sentiment (positive or negative).
If there is interest and overall positive sentiment, the crypto project has a bright future. Positive interactions show a vibrant community, which can be beneficial to the coin’s long-term success and growth.
Analyze Market And Competition
Conduct the crypto market research and check the competitors of the chosen crypto. The thing is that creating a completely innovative idea is quite difficult in our day and age.
Thus, the project probably has alternatives that are in direct competition with your chosen project. Check whether your choice is the best in the industry.
Examine market trends, trade volume, and price history of the chosen crypto to understand its performance better.
Compare it to other cryptocurrencies to determine its competitive pros and cons. Analyzing the market and competition reveals potential risks and opportunities for the future of the currency.
Learn About The Technology
The fundamental analysis of cryptocurrencies also requires understanding the technology behind the project. In fact, it’s one of the most important steps.
Research the blockchain’s fundamental structure and consensus mechanism. Pay special attention to scalability, security, and transaction speed.
Scalability means the ability of the project to adapt to changes, so it’s vital. The usefulness and usability of the currency can be supported by innovative technology.
Seek regular updates and development activity to verify that the project’s team is active and wants to optimize the technology. A strong technological foundation boosts the cryptocurrency’s long-term success.
Understand the Vision
Unlike technical analysis for crypto, the fundamental method requires understanding the basics of the project (hence the name). That’s why it’s also critical to understand the vision of the project or its developers.
Learn about the problem it seeks to solve and the benefits it provides. A clear and ambitious vision suggests the coin’s long-term growth potential.
Seek a clear roadmap outlining the project’s future development and milestones. Understanding the vision allows you to assess whether the coin is a good fit for your investing objectives.
Collaborations with prominent companies or non-profit organizations can increase the legitimacy and adoption of the coin.
Moreover, thanks to these partnerships, it’s even better when the project already has real-world use cases. Research the nature and relevance of these collaborations to assess their possible impact on the project’s success.
Tokenomics And Supply
This cryptocurrency analysis guide also emphasizes the importance of tokenomics. It means the total supply, circulating supply, and token distribution.
One of the ways to spot a stable and profitable project is to ensure that it has a well-balanced tokenomics model with fair inflation rates and defined distribution strategies. Check that the utility of the token corresponds with the project’s goals.
When evaluating cryptocurrencies, it’s also crucial to check the asset’s track development. The track record must include a list of all updates, code alterations, and technological advancements.
A good project must have regular updates since active development implies a committed team and continual efforts to improve the product.
Analyze Market Sentiment
One of the easiest ways of determining the overall market sentiment is by going on social media and popular forums. You can also check whether the asset makes it to the news.
Positive sentiment offers possible growth. Negative sentiment may point to risks. Keep a look out for community participation and investor interest. If the community is positive about the coin, it may suggest an overall good performance of the asset.
Study Price And Historical Performance
You may use various cryptocurrency research tools, such as charts, to check out the asset’s pricing and performance history.
The simplest chart from a Google search can do the trick. However, you should also check out the price patterns, volatility, and significant price changes.
Past performance provides invaluable insight into how the coin responds to market situations. Consider the elements that have influenced price adjustments in the past.
However, keep in mind that past performance does not guarantee future results, whether positive or negative. That’s where technical analysis may come in handy.
Learn About Regulatory Compliance
You’re most likely examining legal cryptocurrency projects, but it’s still worth checking out if they comply with all regulations.
No one wants to invest in a project and then learn that it’s registered under a different asset type or doesn’t comply with regulations. In that case, the asset may lose all its value.
Verify that the project conforms with applicable rules and regulations in the areas in which it operates. Regulatory compliance boosts the project’s reputation while lowering potential legal threats.
Examine how the team handles issues such as already mentioned AML procedures and know-your-customer (KYC). A project that is compliant is more likely to get backing from institutional investors and users.
Make Informed Decisions
Once you gather all the information, according to the previous steps of this guide, you can make an informed decision.
You don’t have to choose only one project from the ones you’ve been researching. Instead, you may invest in a few promising projects that solve issues in different industries. Thus, you invest smart and secure a diversified portfolio!