How to Do Your Own Cryptocurrency Research?
Take a closer look at the different factors to consider and research before investing in any cryptocurrency coin or token.
Cryptocurrencies are becoming increasingly more and more accessible. It can be easy to get confused or even intimidated by all the different coins, tokens, and jargons out there.
One of the best practices you can do before jumping into crypto, or any investments is to do your own research and make more informed decisions.
Have you ever heard about DYOR? If not, don’t worry. This crypto term stands for “Do Your Own Research”.
It is one of the most valuable lessons you can learn as an investor. However, many people overlook this and fall into the hype trap.
Too many people rely on others to do their research for them, but that’s not a smart investment strategy. So, today I’m going to give you some tips on exactly how you can do your own analysis of cryptocurrency projects and avoid falling for hyped up ideas.
What is cryptocurrency?
Before we start, let’s cover the fundamentals first. What are cryptocurrencies?
Cryptocurrencies are decentralized digital currencies that enable instant payments over the internet without going through banks or clearing houses. They are designed to be secure, anonymous and private.
The best way to explain cryptocurrency is to think about it like regular money (fiat currency) but digital. With fiat money you can buy products and services – the same can be said with cryptocurrencies.
You can use them to buy goods or services from any business that accepts them as payment. Some people even use them just like cash these days as they have become so popular among both businesses and consumers alike!
The first cryptocurrency – Bitcoin was made anonymously by a person/group known as Satoshi Nakamoto.
As of this publication, there are over 20,000+ cryptocurrency coins and tokens, and that number is likely to increase in the foreseeable future. Which means, it’s more important than ever to DYOR before proceeding with your crypto investments.
Read more: What is Blockchain Technology?
How to research crypto projects
As with any investment endeavors, it’s always important to do your due diligence and conduct your own research. Doing your own research allows you to make more informed decisions and plan your investments according to your own specific circumstances.
Now this can be easier said than done, especially if you’re someone new to crypto or investing in general.
Don’t worry we’ve got you covered. To get you started, we’ve curated some key indicators below that you should look into during your crypto research.
1. Study the whitepaper
A whitepaper is a document that explains the technology behind a blockchain project. It’s usually written by the developers of the project, and it can be very technical.
The best place to start with crypto research is by reading a whitepaper. You can find them on the website of each project (just Google “[project name] whitepaper”).
It should be noted that not all projects have a whitepaper. If you find one without one, it doesn’t necessarily mean that it’s not worth investing in. Just make sure to do extra research on the team and their background before you invest.
A good whitepaper will include information about how the company plans to use blockchain technology to solve a problem in their industry or how they plan to develop their product or service further.
2. Know team supporting the project
It’s no secret that cryptocurrency projects are largely anonymous. This is because many of these projects were created by a small group of developers who aren’t interested in the spotlight. They prefer to focus on their project rather than their own personal brand.
However, there has been an increasing interest in transparency when it comes to crypto projects. Some investors are looking for proof that a team is capable of delivering what they promise. Others are simply curious about who is behind the project.
If there’s a specific team behind the cryptocurrency network, its members track records can reveal whether the team has the required skills to bring the project to fruition.
The best way to evaluate a team is to examine its public presence on social media as well as its website. If you’re looking for developers or engineers involved in your project, then you should check out GitHub for open source contributions.
3. Analyse economic activity
Next, you also want to analyse and asses the economic activity of the project. This goes without saying, but you should reconsider investing in something that doesn’t appear to have any sign of healthy economic activity.
You can check a project’s economic activity by visiting coinmarketcap or coingecko. There you can check the price chart for any price movement and activity. Be sure to also change the time frame from 24 hours, to a few months back to have a historical outlook of the asset’s performance.
Market Capitalization (Market Cap)
By definition, market capitalization is a representation of a network’s value that can be calculated by multiplying the current price by the supply coins in circulation. It is one of the most important metrics used by investors to determine the size and health of a cryptocurrency.
For example, if we compare Bitcoin to Ethereum in terms of market capitalization, we see that Ethereum is significantly smaller than Bitcoin but still has a very large market cap.
This tells us that Ethereum has room to grow because it’s only just beginning to mature as an industry. It also showed us that a larger market cap also points to stronger infrastructure and lasting power – just like Bitcoin.
If you want to find out more about your asset market cap. Jump to coinmarketcap.com, choose your cryptocurrency for example Bitcoin, then click historical data.
Liquidity and Trading Volume
In the world of finance, liquidity refers to how easily an asset can be bought or sold. A liquid asset is one that we’d have no problem selling at its trading price, and a highly liquid market has plenty of buyers and sellers at any given time.
Trading volume is simply the number of shares, contracts or currency units that were traded in a particular period of time (usually one day). It showed us how much the value has been traded within a given time period.
In the case of cryptocurrencies, coins and tokens that have been around for awhile will likely have high liquidity, whereas tokens that are still in their infancy might exhibit the opposite, which is illiquid, where there is low trading activity and you may encounter difficulty selling those assets.
It’s difficult to buy or sell them at their current market price. One way to calculate your crypto liquidity is by dividing trading volume per day to the value of the token.
For example, The market cap of Bitcoin is equal to 564 billion dollars and the 24 hours trading volume is about 26 billion dollars. The Bitcoin’s value is $29.655. We divide the trading volume per day by the value of the coin. And, finally we get 876.749 Bitcoin – the turnover of BTC per day.
The circulating supply of a cryptocurrency refers to the total number of coins in active supply that are accessible to the public. This is often confused with the total (max) supply, which is the combined amount of coins that have been created by miners and not yet been mined by anyone else.
Because cryptocurrencies can be mined, there may be coins in circulation that are still in the process of being mined by miners. The circulating supply is thus a subset of the total supply. There are two main reasons why you might want to know about a coin’s circulating supply:
- To get an idea of how many people are currently holding this coin. If there’s a lot of coins in circulation, it means that people are trading it and accepting it as payment. This is a good sign for the longevity of the project
- To compare its circulating supply with other coins to see how many people are holding it relative to other projects. In this way, you can see if your coin has more or less users than other projects.
4. Assess their socials engagement and community
It’s important to check the social media accounts of a project before you invest. This is where you’ll find most of the information about the team and their plans for the future.
The most common social media platforms are Twitter, Telegram, Discord and Reddit.
- Twitter is one of the easiest ways to learn more about any project. The best way to use Twitter is by searching for keywords related to your favorite projects. You can also follow their official accounts and get updates on their latest news and events.
- Telegram is a messaging app that allows people to communicate with each other in real time. It’s a great way to talk directly with project teams about anything from questions about their token sale or what they’re doing next in development. Telegram has become a popular place for ICOs to hold discussions with potential investors, so don’t be afraid of asking any questions you may have!
- Discord is used by many projects as an alternative chat platform for those who enjoy using voice channels instead of text-based chats like Telegram or Slack (which isn’t as widely used anymore). It offers more features than its competitors like voice calls and video chatting capabilities, making it ideal for groups of people who want to discuss things visually rather than just textually.
5. Check for potential scam
One of the most important things to understand about scams is that they have one goal: to get your money. Scammers will do whatever it takes to get their hands on your hard-earned cash, and they’ll do so in a variety of ways.
The most common way that scammers make money is by using fake websites and social media accounts to trick you into sending them money.
Some scammers use fake websites that look just like legitimate cryptocurrency exchanges or wallets. Other scammers use social media accounts that impersonate real cryptocurrency companies or individuals in order to trick you into sending them money.
Once you fall for a scam, there’s no telling where your money might end up. Your information could be used for identity theft, which can have serious consequences if you try to open new accounts with banks or credit card companies in the future.
Additionally, Easy Crypto has a dedicated compliance team who proactively help our customers avoid scams on a daily basis.
Further reading: Cryptocurrency Scams to Avoid.
How to buy cryptocurrency in South Africa?
It goes without saying, doing your own research is important to do before proceeding into any investment endeavors, not just cryptocurrencies.
Once you’re ready to decide which crypto to buy in South Africa, we’ve got you covered.
Investing in cryptocurrencies is easier than you think! Follow our guide below to get you started.
Step-by-step on how to buy cryptocurrencies in South Africa:
- Prepare your cryptocurrency wallet
Before you buy cryptocurrency, you need a cryptocurrency wallet. It’s a place where you can store your crypto. Basically, it is like storing your fiat money in your regular wallet, but this time it is in a digital wallet.
Here is a quick guide on how to set up your wallet.
- Sign in to your Easy Crypto Account
If you’re a new user — welcome! Click on the Sign-up button to create an account and proceed with the account verification process.
- Select the cryptocurrency you want to buy
When you want to select the crypto asset. Come to the homepage and select the cryptocurrency you want to buy and enter the amount that you want to spend. Then at the end, click the Buy Now button.
- Enter your wallet’s receiving address
Once you’ve finished choosing your crypto asset, enter your wallet’s receiving address to the corresponding cryptocurrency you want to purchase.
What’s a wallet receiving address?
Your crypto needs a home! Before choosing to buy a cryptocurrency, make sure you download a crypto wallet software that can store it for you. Follow the instructions carefully on how to set up, receive, or transfer crypto.
- Select your preferred payment method
You can currently choose between the different payment methods when buying cryptocurrency on Easy Crypto. The available payment methods will depend on which region you are transacting in, but rest assured your funds are safe with us.
Alternatively, you can also check out the video guide on our YouTube channel below:
Again, as far as buying and selling, you should always do your due diligence before initiating purchase.
Check out some of the other cryptocurrency related articles in our learning hub to help you get started!
Also, don’t forget to subscribe to our monthly newsletter to have the latest crypto insights, news, and updates delivered to our inbox.
Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated Sep 2, 2022