Red Flags To Watch Out For While Doing Your Own Research On Cryptocurrency Projects And Altcoins #DYOR

Red Flags To Watch Out For While Doing Your Own Research On Cryptocurrency Projects And Altcoins

If you invest in the right altcoins now then you can expect huge returns during the next bull market. This is risky and requires you to do some research because if you invest in the wrong ones then you can also lose a lot of money.

Investing in an altcoin just because your favorite manga girl on Twitter tweeted about it is a bad idea, instead #DYOR!

Here are some red flags to watch out for while doing your research. Spotting them is relatively easy when you know them. It really is no quantum physics, anyone can do it.

If you see any of these red flags then you can take the whole crypto project and throw it into the next garbage pin.


A Poorly Written Whitepaper Or None At All

One of the first things to do while doing your own research is to check the project’s whitepaper. If you can’t find any whitepaper at all then you are already finished with your DYOR and you can move on to the next project.

It is essential that a project has a whitepaper. If a project does not have any whitepaper at all then you can be pretty sure that it is absolute trash. There can only be two reasons why a project has no whitepaper. The people behind the project are either total dilettantes or the whole project simply is a cheaply made scam. Having no whitepaper is a big red flag that yells at you: “Stay Away!”

Then there are also those cases where you find a white paper but it is just poorly written. If this is the case, the website itself also looks cheap in most cases. Let me give you an example of a poorly written whitepaper. Here is a screenshot of the whitepaper from one of the oldest scam projects around called “Bitcoin Black”.


The first sentence that you can read in their so-called whitepaper is this one:

“Bitcoin Black aims to be the cryptocurrency of the people, by the people for the people. Bitcoin Black’s intention is to be adopted for use as a p2p payment system which gives the power back to the people.”

The rest of the white paper goes on with bullshit like that and honestly, you should recognize that it is bullshit. If you do not recognize that this is poorly written trash then investing in cryptocurrencies is not for you. When you continue reading, you can also find a lot of stuff that is simply copied and pasted. Whole passages are about general definitions like “What is a foundation?”

If you read things like this in the project’s whitepaper then take your hard-earned Bitcoins and run. This is a huge red flag!


Poor Social Media Presence

The next thing that you want to check out is the social media presence. If the project has no social media presence at all then it is a huge red flag.

If you find the project being active on social media platforms then you can start evaluating the content as well as the community of the project.

Little or no activity is a sign that the project is experiencing difficulties. The same applies when the community is full of trolls that are attacking you whenever you have a legit question.

Finally, when you see that everything is only about the price of the project, getting rich, or airdrops then you also consider this a red flag.


No Use Case

The crypto projects and the corresponding altcoins that you are potentially investing in should have one or more concrete use cases, for example, it is needed to pay the transaction fees on the blockchain or for government purposes.

Here is an excerpt from the Bitcoin Black Whitepaper describing its use case.

“The most obvious use case for the blockchain is what is known as money. P2P electronic cash: A peer to peer payment system which is completely decentralized that giving the power back to the people. No need for a 3rd party to be involved. A way merchants can accept payments directly from consumers without fees or long processing times. A way to move money across borders and countries simply and free without permission from any corporation and a way for business’s to run locally.”

Lmao, honestly? This is really written in the Bitcoin Black Whitepaper including the typos. Typos aside, this is just a general description of Bitcoin and Blockchain technology. This is not a use case at all. A use case of a token has to go beyond the standard blockchain technology of sending and receiving a digital asset.

If you want to know what real use cases are, I recommend reading one of my previous articles about Binance Coin with the title “Numerous Use Cases Are Making Binance Coin The Most Diversified Asset Itself

Another example of meme Tokens is with all kinds of dogs and cats. Be aware of the fact that a meme coin has no use case. The only miracle that you can keep hoping for is that some crazy billionaire all of the sudden starts shilling the coin on Twitter.

Well, you can be happy if this happens but I wouldn’t count on it. Most meme coins disappear as soon as they had popped up before. Also, keep in mind that the one who was able to pump the price via a tweet can also bring the price down via a Tweet. This is out of your hands and if you want to try to take advantage of these kinds of market manipulations then you can also burn yourself.

If you want to stay on the safe side, look out for real use cases and not for funny memes.


Bad Token Metrics

If you haven’t spotted any red flags so far then you can continue your own research by analyzing the tokenomics. I do understand that most of you don’t know much about analyzing tokenomics but that’s ok. You can keep it simple and focus on some key points.

First of all, if the project has already issued its own token long before the actual product is ready then I also consider this a red flag. 

Another red flag is poor token distribution. Huge parts of the total token supply are allocated to the team and/or there are big token unlocks in the first few months after the launch. 


Anonymous Team

I often read that an anonymous team is also a red flag but I think that this is not always the case. I don’t think that an anonymous team is necessarily a red flag but it should t least be something that raises your suspicion.

The main reason that a team should be publicly known is that you have someone you can hold accountable for any misbehavior. Well, there are numerous cases where you see that this also gives you no guarantee at all. This is one of the lessons that we have learned this year from the collapse of trusted projects like FTX and Terra Luna. Sam Bankman Fried and Do Kwon, both turned out to be fraudsters and you know their identity but in the end, you still get nothing.

On the other hand, none really cares about the anonymity of Satoshi Nakamoto. We still don’t know who invented Bitcoin and that’s totally fine.

That’s why I believe that an anonymous team should raise your suspicion but you should not necessarily consider it a big red flag.


My Final Conclusion  

Smart guys are doing their own research and finding the best investment opportunities during the bear market. Stupid guys don’t DYOR and ape into the next pump and dump at the peak of the next bull market. Don’t be that guy, be the smart guy. Promise me that. Always do your own research before you invest and never invest in things that you do not understand. In the end, you alone are responsible for your investment decisions and no one else. Watching out for these red flags is an essential part of your own research and if you spot any of them then you know that it is time to move on.

In this sense, I like to point out once more that I may look smart in my profile pic but I am not your financial adviser. Nevertheless, I hope that reading my article was somehow helpful as well as entertaining to you.

If this is the kind of stuff that you like to read, make sure to follow me for more.

Thanks for reading and if you like, you can also follow me on Twitter and Medium.



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