While Bitcoin and Ethereum are two of the world’s most popular cryptocurrencies, they are by no means the only options you have when starting your trading and investing journey. There are over 5,000 different cryptocurrencies from which you can choose, but investors always face the risk of investing in scam projects and tokens with no real value. What should you look for when investing in a token? In this post, the Wisebitcoin team offers a few insights.
Crypto investors must deal with regulations, compliance issues, and volatility when executing trades and making crypto investments. However, they must also smartly put their money into sound investments. How can you tell a good investment or project from a bad one, especially when there are so many new blockchain-powered crypto projects issuing new tokens every day?
Here is a quick, effective blueprint for determining whether a project is worth your investment or not.
1. Thoroughly analyze the project whitepaper.
Any crypto team that knows what it is doing knows that the project whitepaper is perhaps the most important document that they will ever write. In it, the team makes a case for why their token is needed, what it will do, where it can be used, what problems it will address, and how it is different from other alternatives.
The project whitepaper will also put forward the token’s USP/UVP (unique selling proposition/unique value proposition) and is essentially a sales pitch as to why the token should be invested in.
If the whitepaper does not convince you, nothing else should.
2. Analyze the project team.
Next, if you believe that the project sounds good on paper and has real use cases and value, look at the team. Ask yourself if you think the team can execute on the grand vision they have laid out in their whitepaper. Remember this: No matter how good an idea is, it can still fail if the team’s execution is poor. Similarly, even mediocre projects can enjoy amazing success if they are backed by the right teams and people who make the right decisions and moves and market entries at the right times.
Look into their qualifications and their previous ventures and projects. See if they have been involved in or incriminated in any scams. Serial scammers are not uncommon in the crypto world, but thankfully, news travels fast and you can avoid a seemingly promising project if it has been launched by a known fraudster.
3. Investigate project socials.
Now we are getting into the real investigative part of your research. A sound whitepaper and a seemingly qualified project team can be enough to attract investments in a new project, but a good way to tell whether the project is truly legitimate is to see what kinds of social activity they have. Do they have a formal website, Telegram channel, Facebook page, Reddit community, and/or Twitter following? Do they have dedicated community reps and resource people tasked with outreach and education?
The harder an operation is to perform, the harder it is to fake it. If a project has these pages and teams in place, you can easily tell. If they do not, you can easily tell as well. Avoid a project that does not have (or does not even attempt to build) a far-reaching social presence in the right channels.
4. Can you invest?
Let’s say there is a promising new project you would like to invest in. What if you cannot, because of legal, jurisdiction, regulatory, or compliance issues? You must be allowed to invest in or trade/exchange a token or asset before doing so. Do not purchase or invest in tokens or assets that are not open for trade where you live or operate.
5. Time your entry.
So, you have verified that the project solves a major problem and is headed by a reliable, experienced team. It is active on relevant media platforms, and you are legally allowed to invest in the project.
The next step is making sure you enter the market at the right time.
While investing in promising projects is always a good idea, we must be realists when it comes to investing because the objective at the end of the day is to make the world a better place and generate revenues and income in the process. If you buy high when there is market turbulence and lose your investment, that can prevent you from investing in other, value-generating initiatives.
By studying the market, reading fundamentals, and staying in tune with news and developments, you can get a sense of whether a new project will take off and gain widespread acceptance or will be hit by legal and other snags. Enter the market if things are looking up and consider postponing your entry if things are too turbulent for your liking.
Get Started with Investing in Popular, High-Profile Crypto Projects Today
It can be difficult to tell good projects from bad ones, but the steps outlined above can help you weed out bad projects from good ones so that your investments go toward the best, most beneficial projects out on the market.
Wisebitcoin makes cryptocurrency easy, and we have listed many of the most popular and widely accepted crypto tokens available. To learn more about cryptocurrencies and to open a trading account, please visit us at Wisebitcoin.