The cryptocurrency market attracts the attention of not only experienced investors but also laypeople who have never bought crypto before. While #Bitcoin (BTC) was the first cryptocurrency – and still the largest by market capitalization – it wasn't long before alternative coins ( #altcoins ) emerged, including PEPE ( $PEPE ), Dogecoin ( $DOGE ) and more.
Currently, there are more than 19,000 cryptocurrencies, and many of these altcoins frankly do not have a promising future. So it's important to learn how to know which coins are worth your time and money. In this guide, you'll learn six effective ways to evaluate cryptocurrencies so you can invest with more confidence.
1. Visit the Project Website and Do Initial Research
The project's official website is the initial gateway to getting to know the cryptocurrency you are interested in. There, you will find various important information, such as:
Project description: Understand the project's goals and vision, and how they want to solve a problem or improve a sector.
Development team: Find out who is behind the project. Pay attention to their experience and track record in the blockchain and technology industry.
Roadmap: Learn about the project's future development plans, including new features, partnerships, and targets to achieve. Usually this will be divided into 4 quarters in one year.
Whitepaper: Read the whitepaper carefully. This document contains many things, such as a technical explanation of the technology used, tokenomics (token economics), and how the coins will be distributed. There is a lot of important data from a project contained in the white paper
2. Trace Digital Footprints on Social Media
Social media is a valuable source of information for understanding the communities behind cryptocurrencies. Observe the following things:
Social media activity: How active are the project team and community in interacting on social media? Is the social media project still active? if it is not active, then there is a question mark whether this project is feasible or not.
Community sentiment: How does the community feel about the project? Are they enthusiastic and supportive, or is there a lot of doubt and criticism?
Team engagement: Is the project team actively answering questions and responding to comments on social media? Especially if there are problems with the project or platform.
3. Development Team Analysis and Strategic Partnerships
The reputation and credibility of the development team plays an important role in determining the future of the project. Pay attention to the following points:
Team experience: Does the development team have relevant experience in the blockchain industry and the project's underlying technology?
Previous involvement: Do they have a successful track record in launching other projects?
Strategic partnerships: Does the project collaborate with well-known companies or organizations that can increase its credibility and opportunities? for example, project A was funded by Binance, and others
4. Study Cryptocurrency Market Metrics
Understanding market metrics can help you assess the potential and stability of cryptocurrencies. Here are some important metrics:
Market capitalization (market cap): The total value of all coins in circulation multiplied by the price per coin. A high market capitalization generally indicates a more established and stable project.
Trading volume (trading volume): The number of coins traded in a certain time period. High trading volume indicates good liquidity and high market interest.
Coin supply: This coin supply includes the total number of coins in circulation, the number of coins burned (destroyed), and the total supply plan in the future. Limited supply can increase the value of coins over time, and this will affect the market cap.
5. Study Price History and Avoid Sudden Increases
Coin price history analysis can help you understand trends and potential market manipulation. Pay attention to the following:
Reasonable price increases: Avoid coins that experience unreasonable price increases over a short period of time, as this could indicate a "pump-and-dump" scheme (raising the price and selling quickly for a profit).
Volatility: Pay attention to the degree of coin price fluctuation. High volatility indicates greater risk.
Long-term trends: Observe coin price trends over a longer period of time to see their potential.
6. Understand Long-Term Utility and Value
Smart Contract Platform: Enables the development of decentralized applications (dApps) on top of its platform. For example Ethereum (ETH).
Utilities: Used to access certain services or features in the project. For example, Binance Coin or $BNB which is very useful on the Binance platform
Adoption: The more people and businesses that adopt a token, the higher its potential to have long-term value. Wide adoption shows that the token is in demand and has the potential to be used in a variety of applications.
Roadmap: Projects that have a clear and realistic roadmap with measurable goals are more likely to attract investors and have long-term value. A clear roadmap shows that the team has a vision for the future of the project and is committed to making it happen.
Those are the 6 keys to analysis before we decide to buy a coin. Hope it is useful
