Good evening everyone! Sometimes people ask me about how to find great crypto projects, what to consider and so on…so we’ll see in some articles a few steps to consider when you DYOR about crypto projects.
- General research
Start by researching the project online (through Google searches etc.) Try typing in the asset’s name, go at least 5 pages deep into Google, and open anything interesting. Also, make sure to try different keyword combinations. Check for independently written research articles too (written by anyone but the project’s team) for a more rounded overview of the project.
Ask yourself:
- Where does this project get its value?
- Does it have the potential to grow over time?
- What exchanges is the crypto on?
- Who is the crypto partnered with? What do the partnerships mean?
Resources:
- On-Chain
On-Chain metrics can get complicated, we’ll simply give a brief introduction to a few more basic metrics. You can check most of these details on CoinGecko and CoinMarketCap, as well as block explorers.
- Market capitalization
Look at the crypto’s market cap to help you consider the potential for its future growth. Projects with larger market caps usually have less growth potential than lower cap projects. So, if you invest in a crypto that already has a huge market cap, it will be harder to get a significant return. However, note that projects with larger market caps are generally considered to be less risky.
While there’s no single universal definition, cryptos are usually split into Large, Mid, Small and Micro Caps.
Note where the crypto you’re looking at lies in the market as this can give you an idea of how the price may move, and what the potential risk: reward ratio is.
Usually:
- Large Cap: > $10B (these tend to be more established, less risky, and move the least).
- Mid Cap: >$1B & < $10B (relatively established but more volatile than large-cap, and prices change more often, which means they often have more potential upside but equally more risk).
- Small-Cap: <$1B & >$100M (higher risk and more volatile than mid or large-cap).
- Micro-Cap: Usually <$100M (usually relatively new and the riskiest, but also may be most profitable for early investors).
Maximum & circulating supply
What is the maximum supply? Does it have one? (some cryptos don’t).
What is the circulating supply? (What is the number of tokens currently in circulation?).
The basic laws of supply and demand have a significant effect on a crypto’s price, so having at least a basic understanding of what circulating and maximum supply is will help to give you an idea of how much demand is necessary to increase the price.
The circulating supply is the number of tokens that have been issued so far (the number of tokens currently in the market). The maximum supply is the total number of tokens that will ever exist.
What is the difference between the circulating and maximum supply? If there is a big difference between the two, where are the remaining tokens and how will they be deployed?
Transaction count/value & active addresses
Also, look at the active addresses and transaction count/value to get an idea for the use of the project.
- Transaction count offers an indication of how much activity is taking place on a network. However, note that this should be taken with caution as there’s no way to tell that it isn’t just one party transferring funds to increase the activity.
- Transaction value tells us how much has been transacted within a certain period of time.
- Active addresses refer to the blockchain addresses active in a certain period.
Wallet holders
Check the wallet holders of the token to make sure that no single wallet/individual owns too much of it (to avoid whale manipulation). If a few investors, or team members, hold a large amount of the tokens, it adds a high potential risk. They could have excessive swing over governance or control the price by pumping and dumping to suit them.
Resources:
- CoinMarketCap
- CoinGecko
- Blockchain explorers
This is only the first article about “How to DYOR”, don’t miss the second part!
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