The fundamentals of investing in a crypto project

The fundamentals of investing in a crypto project

If you have some experience in the industry, you probably know how exciting it is to invest in a new crypto project. However, it also requires a lot of work because you need to do your homework to ensure that you pick a digital asset that’s likely to have a positive path in the future. 

When chosen carefully, crypto projects can be profitable investments. However, if you fail to research and find the necessary details about them, there’s the risk of losing the funds invested for various reasons that can range from a cyberattack to an inside job. To secure a return on your investment and protect your portfolio from loss, it’s paramount to research the crypto projects ahead. 

This article provides information about the aspects you must check before investing your money into a digital asset. 

Check the project’s website

The first thing you should do when considering adding new crypto to your wallet is to study its official website, roadmap, and white paper to find out more about it and its developers. These resources should provide you with clear answers to what utility the cryptocurrency intends to have, what its application will be, and what long-term goals and plans it has. All these details will help you decide if the project aligns with your goals and values. 

Find more about the partners

After finding basic details about the project, you need to start in-depth research to find more about the funds and other projects that support its evolution. You’ll most likely find information about these details on the project’s website, but it’s recommended to double-check the data from other sources. If no reputable third parties support the crypto asset you’re assessing, you should abstain from investing in it. Keep an eye on its evolution, and time will tell you if it’s worth your attention. 

Take a look at security audits

Now it’s the moment to search for information about the project’s security audit and MVP because they’re crucial for your investment’s success. It’s easy to find the information online if the developers run one or more audits on their product. Smart contracts security auditors are transparent about this piece of information and usually publish it on their official pages with links to reports so any investor can read them and find out more about the crypto project. Reliable crypto projects also share these reports on their websites to provide the prospects with all the necessary details in a single place. 

However, when you evaluate the security audits, also pay attention to the organisation running them because not all meet the same professional standards. If an unknown company completes the audit, you should doubt its reliability and objectivity. But if a reputable and specialised auditor evaluated the project, you should take it as a positive sign that the crypto token is committed to meeting its declared goals. 

Go on a social media investigation

You’re probably familiar with most social media platforms, so it won’t be difficult to find the project’s pages (if they exist) and engage with them. These days social media not only that it teaches people how to buy cryptocurrency but also helps them figure out which digital asset to add to their portfolios and provides them with information about the best strategies to use. So, without a doubt, it can help you figure out if a new project is worth your attention. 

Twitter is the first social media network to browse because crypto enthusiasts usually use it to share their opinions on digital assets. You can use the platform to analyse the project’s community and see investors’ involvement. Run in-depth research to find out how many influential individuals are following the project because, as you may already know, if famous people create buzz around a cryptocurrency, it’ll immediately skyrocket. 

Then go on Medium to find out if the project has an active account. If it has, it’s a sign a professional team invests their time into sharing information about the project.        

Study the team

It should be easy to find the social media profiles of the project’s team members on Twitter and LinkedIn. Crypto projects are usually transparent about their management team and provide information on their websites. Access their profiles and look for previous professional experience, and cross-reference it with the tasks they complete for the present project. 

And while doing this, you should also verify if the project has an ambassador program. Reliable crypto projects allow community members to become ambassadors and promote digital assets. However, if the project isn’t serious about reaching its long-term goals, it won’t bother to work with an ambassador, especially with an influential individual. 

Token distribution

If you’re a seasoned crypto investor, you most likely know that some projects have a limited number of tokens available. Therefore, you need to verify the allocation and vesting period for the team, but also the distribution for investment rounds, to determine if the asset is competitive enough to succeed and survive in the market. During this stage, you also need to check the kind of vesting period the investors established and the platforms where the tokens are available for sale.

Research the competitors

Now that you know plenty about the project, it’s the moment to research the market for its competitors to find more about them and determine where your project of choice stands in the market. Compare their strengths and weaknesses so you can understand if it’s worth adding the asset to your portfolio or picking a competitor instead. 

Risk management

Suppose you want to diversify your portfolio by adding cryptocurrencies and investing a share of your funds in a new project. In that case, you must identify the best risk management strategies. Create an investment strategy that fits the project and stick to it to limit the risk you expose your portfolio to. 

Closing thoughts

Remember that when choosing a crypto project, you need to ensure it suits your trading style and strategies. 

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