This is perhaps one of the most frequently asked questions in the cryptocurrency market. Every day, dozens or even hundreds of new currencies appear, which makes choosing the appropriate currency an essential skill. This skill is necessary to be profitable in the digital currency market and to avoid falling into failed projects.

In this article, I will show you 6 aspects of studying a digital currency project, each of which has several points. By the end of this article, you will have enough knowledge to identify good projects in the market with great skill.

1- Study the basics

I always advise anyone who is new to the market and feels confused between different currencies to approach investing in digital currency projects the same way as investing in startup projects. Before you invest, you must know the general idea of ​​the project, who is behind it, and who is financing it so that you can make the right investment decision.

Whitepaper

Studying the whitepaper is an essential step in your journey to learn about the project. The white paper aims to explain the main idea of ​​the project and how it works. Unlike reading an article about a particular coin, a white paper provides a space to learn about the project professionally. You can always find the projects whitepaper either on their official website or in the project's Github files.

Roadmap

The best way to know the development of the project, what it has achieved and what it will achieve is the roadmap. Most cryptocurrency projects create a roadmap to tell their investors about their future plans. One of the important things to know about the team's seriousness is to follow up on whether what was mentioned in the roadmap has actually been achieved or not.

project team

A key rule for the success of any project is the team. Even if the project idea is revolutionary, the lack of a highly experienced team makes it difficult to implement this idea easily. Most projects that are launched recently have a well-known founding team, so researching those behind the project and their experiences may give you a picture of the team’s ability to implement their idea and its success.

Project investors

Most of the projects launched recently have gone through investment financing rounds. These rounds involve huge investment companies in the market such as Binance Labs and others. The presence of large investors in the project may sometimes mean easier access to these platforms or close relationships with market makers that help the project rise.

2-Assessing the project’s market performance

Trading activity

Basics are not everything. Many projects that have a distinct idea and a strong team do not find demand in the market. Therefore, analyzing how the market treated the project is very important for proper project analysis. What you are looking for is active trading volume on the currency on a regular basis.

Avoid tracking trading volume over a long period, as this will not tell you the whole story. For example, tracking daily trading volume and seeing normal trading activity is a good indicator for the currency. But seeing weak monthly trading activity except for one or a few days means that demand for the currency may be artificial.

Listed platforms for the currency

The currency listed on several platforms means that demand for it is highly liquid. This is very important, as you do not want to invest in a currency and see that it is listed on only one platform, which means that only users of that platform will be able to buy it. Look for a variety of currencies on exchanges because each platform means a new investor base exposed to buying the currency.

3- Evaluation of competitors for the project

Project sector

One of the most important aspects of studying a digital currency project is studying the sector in which it is located. Studying the sector gives you a glimpse into the outlook for the currency and how it can compete.

Studying the competition also gives you a glimpse into how one business or project distinguishes itself from another. You must know well what sector the project competes in. Is it a decentralized trading platform, a liquidity platform, or a staking platform?

Knowing the sector gives you an idea of ​​the size of the competition and the size of the market you are competing for. Knowing the sector also gives you an idea of ​​whether this sector is currently popular. For example, if a project is in the NFT sector, this sector is currently in a declining stage, so its scalability is weak. If it is in the DeFi sector, this is currently a thriving sector and the chances of the project thriving in it are excellent.

Competition barriers

One of the things that some people don't know about is analyzing what is special about the project. You may not know this, but many projects that appeared a while ago were just a hard fork of another successful project.

For example, is this a DEX project like any DEX whose hardfork is taken from Uniswap, or is there something different? This is very important to know whether this project is sustainable or just gaining momentum.

4-Currency community

In fact, this is one of the things that is extremely important for a successful project. Does he really have a real community? Put 100 lines under it. Some projects are filled with community members who are so-called prize hunters, who are just there to participate in the Giveaway. These are not what we mean.

What you're looking for is a community of project users who make use of the service and share interest. This makes the community a means of indirect advertising of the project which may be the most important in the market.

5-Currency economics

Studying the economics of the currency, such as the number of currencies circulating in the market, the total number, and inflation of the currency, if any, is very important. There are many projects that met all of these conditions that we talked about, but they wronged themselves and their investors with bad economics that were a major reason for the project’s failure.

6- Risk study

You rarely find a project that has not been hacked in this market.

This does not stem from negligence, but it is the tax of innovation. But how the team deals with the hacking process and how it was able to recover from it is strong evidence of the seriousness and sustainability of the project.

In the end, I believe that understanding these points improves your skill in choosing the appropriate currency for your investment well.