6 Key Factors to Research on New Crypto Investments

6 Key Factors to Research on New Crypto Investments

Answering these 6 Questions Could Make or Break Your Portfolio When Doing Research on New Investments

Hype-based Investing is Not Enough

The crypto world moves fast. Every minute, it seems someone is getting rich in the blink of an eye. It can be tempting to stare at the charts all day, chase the hype, and invest blindly. If you do this, you are setting yourself up for failure. It may work the first couple of times, but given enough time your luck will run out. Without doing research, how do you know if a coin is in the middle of a pump-and-dump or actually on the rise?

Unfortunately, it is not just investors that feel the hype in the world of crypto. Scammers are also very well aware of ICO-mania. There are also entire groups of people dedicated to pumping and dumping low volume altcoins. Whether it is a new ICO or a coin on the rise, you need to do your due diligence before investing.

While there’s no one way to guarantee a safe investment, there are some quick things you can do to mitigate the risk. Make sure you answer these six questions before you invest in a new cryptocurrency.

1. Who’s on the Team?

When you invest in a cryptocurrency, you are putting your faith in the team behind it. The team is responsible for bringing these ideas into reality. Any reputable project will make at least the project management team, if not the entire team, public. As an example: the OmiseGo page lists the management team as well as their advisors.

OmiseGO Team
OmiseGo Management Team

Take the time to research the team management and members. Make sure they are real people, as there have been clever scams in the past that include fake teams. Try to find the team member’s social media profiles – and make sure their profiles link back to the project! Props to the Golem team for linking directly to the team’s LinkedIn profiles to make this easy:

Golem Team
Golem Team

Be on high alert as you research the team members. Look out for any history of scams or shady projects in their past; anything that would turn you away from investing.

2. Does the White Paper Make Sense?

Take the time and read the White Paper. The whitepaper is where the team outlines the ideas, goals, and the purpose of the project. While still theoretical, the white paper should show that the team has thought things through. The white paper is the team’s opportunity to answer major questions about the project.

Who is it for? Think about the audience. Are they likely to use a cryptocurrency-based solution?

What does this project do and what problems does it solve? How is this different from existing solutions?

Consider the advantages and disadvantages cryptocurrency tech brings. Could this problem be solved better with a more traditional solution?

3. Is the Roadmap Detailed & Viable?

Any team worth their salt will provide a roadmap outlining the present and future goals of the project. How detailed is this roadmap? How plausible is it? Additionally, look out for updates to the roadmap. Good teams will be transparent on their progress. If the team is quiet about their progress, keep that in mind.

4. How Much Progress is There So Far?

Expect a proof of concept from the team early on. It does not need to contain every bit of functionality that the project intends to have when finished, but the team should have something out. Reputable teams will also make their source code and development activity public. This is usually through a site like GitHub or other project management sites.

If the project lives on GitHub, it is easy to get a quick view of the project’s development activity. A quick way to visualize this is to go to the GitHub page for the project. Then, go to the insights section.

Click on the Insights link on the Project's GitHub page

Here you can get an at-a-glance view of the recent activity for the project.

Golem Project Recent Activity
The Golem Project’s Recent Activity

Another thing to look at is the project’s “Issue” Tracker. There’s another section in GitHub for this as well. If you are not familiar with the term, don’t panic at the word “Issue”! Not every issue is a problem with the project. Instead, the term can be both positive and negative. For example, an issue could be a feature request or a bug report. Pay attention to the activity of the project; it will give you a good idea about the momentum of the project.

5. Is the Team Engaged with the Community?

It is a good sign if the project actively develops a relationship with its users. While not an absolute requirement, solid teams will be engaged in an ongoing dialog and building a community. Take a look on Reddit, on bitcointalk.org, or the project’s communities. Is there a Slack channel for real-time communication? How about a subreddit or twitter page for news updates? Is the team available for discussion? None of these are mandatory, but they all go a long way when it comes to transparency.

On the other hand, is the project’s primary method of outreach through Ads? While there’s nothing wrong with advertising, if a project’s only form of communication is through promotional material, it can be a bad sign.

6. What are Others Saying?

Luckily, you are not the only one doing research. Take a look at what other people are saying about the project. Are other people excited about it? Do they see the potential? You need to be wary at this step; watch out for any signs of astroturfing.

Seek out reviews from industry experts. Does the project have reports on sites like ICOalert? Also, are big names in crypto excited about the project? Keep in mind; these opinions are not gospel. However, they do have a good track record.

You now have all the information you need.

If you can answer all of these questions confidently, you’ll have as clear a picture of the project as you need to make a confident decision. You’ll be confident when you go ahead with your investment, or pat yourself on the back as you dodge the bullets of shady investments.

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