​​Strategies to Evaluate A Cryptocurrency Before Buying.

In recent days the price of Bitcoin and other leading cryptocurrencies like Ether, have experienced an upward swing. For example, BTC moved from what seemed price stagnation at $20,000 levels to almost hitting $28,186.84 on March 20th, 2023. Whenever the price of these cryptocurrencies starts going up, many people show interest in the crypto market and not only seasoned investors who may be looking to expand or keep track of their portfolio but also ordinary people who no doubt do not have experience in the purchase, securing and keeping track of crypto.

Therefore, ordinary people who attempt to buy crypto are faced with a daunting task the very first time when interacting with the vast number of cryptocurrencies in the market. Today, there are over 22,000 cryptocurrencies both tokens and coins which makes it very difficult for a newbie to discern and make an informed decision on which digital currency should they buy and probably make a good return on investment on their hard-earned money. A lot of the existing altcoins do not have a promising future and anyone new in this space may end up buying tokens or coins with no utility or developed with the intention of scamming innocent investors.

In this article, we present seven strategies that new crypto enthusiasts can employ with the objective of informing their investment decisions with utmost confidence.

1. Scrutinize Project’s Website.

It is important that a crypto project you seek to invest in should have at least a high-performance website. Among the things to watch out for in a project that is feasible through its website include:

a. Easy to use and always updated

b. The website should clearly stipulate the tokens/coins objective

c. Content available on the website should not have typos and an impressive content layout

d. Among the content on the website should be a whitepaper/litepaper or pitch deck describing the project in detail to the target audience who will benefit from the project and investors.

e. Disclose legit team members and this should be verifiable where possible including their social media/networks.

f. Illustrate current partnerships the project has secured and media mentions if any.

2. Check out their social media 

 An active community represents a distinct sign of a strong project with a promising future. One way to evaluate this is by visiting their social media accounts or other community profiles. Among the social media accounts used within the crypto ecosystem include, Discord, Reddit, Twitter, and LinkedIn. Investigate the nature of interactions and engagement across these social media profiles between the followers and the project’s team. Avoid projects that are always pushing a token sale always and tend to use a spammy approach in passing this message. The sentiments expressed by followers in the community are something one needs to keep an eye on, meaning avoid projects filled with negative comments.

3. Read Crypto Documents 

A strong crypto project should have an authoritative document explaining the business/project proposal to the various targeted stakeholders. Among the documents, a project can use to achieve this include a white paper, litepaper, or pitch deck. In these documents, the project should outline the problem it is solving, its solution, goals, roadmap, tokenomics, team achievements, and strategies it will use to achieve set objectives.

4. Analyze the Project’s Market Metrics 

The crypto ecosystem has important tools to analyze market metrics such as information and data for tokens and coins on Coinmarketcap.com. Essential information to watch out for includes: 

a. Market Capitalization – this is achieved by multiplying the cryptocurrency price with the total number of tokens or coins in circulation. Strong projects tend to have a high market cap, however, it is not satisfying to only judge a crypto project by evaluating its market cap alone. Coins and tokens ranking in the top 100 are more feasible investments compared to those lower on the list. 

b. 24 — Hour Trading Volume — A token’s/coin’s trading volume is crucial when purchasing cryptocurrencies. A cryptocurrency with a high trading volume within a specified time for instance 24 hour time frames implies active buying and selling of the digital currency by investors resulting in more market liquidity and price stability. 

c. Supply Metrics – It is common for tokens and coins to have a maximum supply of cryptos to ever exist. For example, Bitcoin has a max supply of 21 million BTC however, there are other digital currencies with an unlimited supply. Circulating supply shows the number of coins or tokens in active trading or held in wallets.

5. Examine the Utility of a Project 

Invest in cryptocurrencies that have a practical purpose or the project is innovative in trying to solve a particular issue. A cryptocurrency like Bitcoin which is a decentralized currency serves the special utility of being used as a means of payment and a store of value. Therefore, owing to this value BTC presents to its users among others like security, censorship resistance and affordable means more people uptake the coin to serve the stated purpose creating more demand and hence retaining BTC value over time. Conversely, some tokens or coins exist for fun only such as meme coins and their price is highly influenced by social media influencers. Even though one can make money out of such coins, investors should exercise caution because the meme coins can plummet at any time.

6. Analyze the Cryptocurrency Price History 

The cryptocurrency market is extremely volatile and an additional metric one should watch keenly is the price history of a coin or token. Observing the price over a specified time such as “all-time” price history is essential to understanding short and long-term price trends. An investor should be keen to note highly volatile coins and tokens due to market price manipulation often driven by pump-and-dump activities orchestrated by a project’s team or even its community.

7. Investigate the Project’s Team and Partnerships 

A successful project will have a strong team and often the project members will have experience working on other projects. Core members should be publicly available and verifiable via the project’s website or white paper. Do your own research to verify listed partnerships relating to the project and these relations should be with strong brands which are important in inducing high levels of trust and credibility in a project.

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