In the past few years, Cryptocurrency has gained so much traction that everyone is now investing into it. Research has shown that 1 out of every 5 people has either heard about Crypto, invested in it or has once considered investing in it. It has also been speculated that in the coming years, we would see more global adoption with more countries finding the digital gold as a safe haven and a trusted store of value.
The explosion of the crypto industry didn’t go down without some hiccups. Rug pulls, scam tokens, pump and dump tokens came alongside and brought the need for regulations and carefulness when interacting with DEXes and CEXes to avoid parting with your hard-earned money. Therefore these are probably some things you should know and consider before investing in a token.
Team/Developers behind the Cryptocurrency Project
One thing you should make sure to find out is the team behind any project you want to invest in. Make sure they are not faceless. Endeavour to do your due diligence by visiting their website, read through their portfolio. Going the extra mile to visit their linked in profile to verify the authenticity of their claims would be an added advantage.
In cases where the project seems to tick all the boxes and they chose to still stay anonymous, make sure to find out the reason why they chose to be anonymous. When a team is fully known, it will help guide your choices based on their track record and makes the team stay accountable.
At this point in your research, you need to ask questions like;
- What problem does this project solve?
- How does the team intend to solve it?
- How important is this token to the crypto-market as a whole?
- What is their competitive advantage?
- What makes them different from all other tokens?
Unless these questions are answered, it won’t be advisable to invest your hard-earned money. You wouldn’t want to find yourself dipping your funds into a meme coin that would probably dump on you in the near future. We saw how the legendary “Squid Game “token swept investors off their feet. Don’t be misguided by hypes and shills on Twitter and social media, go for fact. Make sure to get real facts.
Road Map for Growing the Crptocurrency
A promising token should be able to outline their plan for growth and the future. A simple one-pager showing key dates and events timeline for the future is a good sign. A team can grow weak. A key employee can quit his/her job. At such times, it’s only a binding vision and a growth plan which the team is committed to that can enable them stand the test of time. A key example of this is the case of Andre Conje of the Fantom network who recently retired from active service in the block chain industry. His influence was so felt in the Fantom network that he became a notable figure in that project and his retirement almost spelt doom for the project. If they didn’t have a strong team who was committed to the vision and growth plan of the network, it would have taken them more time to recover. So, never underestimate a strong team with a solid roadmap and growth plan.
Crypocurrency Team Integrity
In the course of your research, you would want to be sure that this perceived promising team keeps to their word. You would need to go to their social media handles and see if they implemented their plans at the proposed dates. Integrity is key. It is always said that “talk is cheap but action is expensive”. You want to be sure that the team would keep to their word to do all they have promised.
At this point, it would be very vital to know and find out what alliances has been formed for the progress of the project. Find out if they have a marketing plan and publicity strategy. They need to have a mechanism put in place to spread the news of what they are doing. It is always needful for teams and developers to sustain the vibe of the community and maintain the positive market sentiment. Communication is key. Find out how recurrent their AMA (Ask Me Anything) is and how often they push out tweets and notifications. Communication cannot be underrated.
Demand for use of the Cryptocurrency
It is one thing to have a use-case and another thing for that use-case to be relevant, important and have a market demand. All you may need to do here is to go to their community pages and social media handles and read through reviews about the project. Be careful enough to separate shills from the sincere comments.
It is also advisable here to have a basic knowledge of the block chain industry to know the things that matter and what is expected of them.
More: How to Invest Your First $1000(Cryptocurrency Included)
Cryptocurrency Price and Exchanges it is listed on
You also want to make sure that this token is listed on a CEX or DEX with high security and high liquidity. Find out the number of daily transactions there. This is important because, a substandard listing could spell doom to the credibility of the project. Investors want to be sure that the DEX or CEX is such that they can always run transactions without hitches. Exchanges should be secure, have high trading volume and have a good reputation. You can always read the reviews of exchanges on their App stores.
Cryptocurrency Market Cap
The market cap of a token is simply the product of a token price and its circulating supply. This is simply a figure that gives you an idea about the growth of the token so far and its possible growth potential in the nearest future. A huge market cap tells you that the asset may have run out of gas and may have reached its peak potential per the time period, while a small market cap shows you that the token still has gas to rally and there would be room for growth. If the market cap is small and the asset ticked all the boxes, it’s an indicator that you can buy.
Total Crytocurrency Supply
In this case, you just have to make sure that the token supply is not infinite or some hilarious ridiculous large number. We all know that scarcity increases value. You wouldn’t want to own assets that the value keeps reducing every day because it is limitless. Keep an eye on this index, you would be surprised to find out how important it is to the value of a token.
Still in regard to promoting the value of a token. The burning mechanism of tokens has proved to be an incredible index to measure the worth and value of a token. Burning is a way of reducing the number of tokens in the market and taking it totally away from existence. Projects with a very good burning mechanism has been shown to increase price drastically especially when it’s a new project that has been launched recently. $Binamon and $Yooshi are examples of a project that had a good return on investment because they had an outstanding burning mechanism. So, when next you preview that white paper, do well to see if they have a plan to burn their tokens, it’s a good indicator.
This is a bonus tip and this simply means the rate at which new tokens are released. Having a knowledge of token emission rate would give you an indication for possible sell off in the future. Always remember that they were investors who came in before you and they would likely take profit at some point. So, don’t be caught off guard. Monitor market sentiments, always measure the disposition of investors.
Finally. All these points border on three things namely;
- The Product
- The Team and
- The community.
Although the list above is not exhaustive, but they could be your yardstick for a measure before throwing in your next penny into any token. I hope you found this content enlightening. Stick this page for more enlightening content about finance, Investment and Cryptocurrency.