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Cryptocurrency has come to say, and there is no excessive optimism in saying this. All around the world, we have seen industries enjoy remarkable transformations thanks to cryptocurrency adoption.
Peer-to-peer transactions have become far more seamless, cheaper, and unburdened from bureaucratic regulations. On the other side, we have seen even top bookmakers like bookmaker xyz allow punters to place bets with cryptocurrencies.
Yet, the cryptocurrency world took a beating in 2022. The FXT scandal was one of the biggest the cryptocurrency world has suffered.
With 2022 worrisomely littered with collapses of cryptocurrency projects, the importance of due diligence can’t be overemphasized when investing in crypto.
With this in mind, here are six steps you dare not miss before investing your hard-earned money into a crypto project.
PS: Here’s the ASIC Daily Profitability list showing all the miners, number of coins mined, and the cost of running each miner.
1. Inspect the Project’s website
One of the first ways to check the legitimacy of a cryptocurrency project before inspecting it is to check its website. Serious developers who mean well for their projects will invest their time and resources into developing an attractive website.
On the other hand, an unserious team will put small efforts into their websites.
One of the aspects that you should pay attention to is how frequently they update the side and its ease of use. Also, the project anchors will proudly display their teams on their website if they mean no harm.
Lastly, you should ensure that the website is free of errors and shows the project’s aim and objective.
2. Check the Social Media Handles
Social media is a medium of interaction, and you should find traces of legitimate interactions between the team and users. The team behind a project with good intentions will take their time to answer all user questions.
If you notice that many messages are left unanswered or answered duly, that’s a red flag. Also, it’s imperative to pay attention to the number of followers the project has and the rate a which it grows.
Knowing the number of followers can give you a hint about how people perceive the project and whether or not you should join them.
Lastly, research what people are saying about the project on social media. It might be worth a try if many people are talking about the project. Likewise, if most comments about it are negative, it’s a sign that things aren’t going well at that point.
3. Research the Members of the Team
You must know the team behind the project before investing in it. As mentioned earlier, a project with good intentions will flaunt its team members on its social media handles. However, it’s another thing to know how to evaluate the genuineness of these team members.
The best way to evaluate a team’s proficiency is to check their involvement in other successful cryptocurrency projects. A project with an inexperienced team is more likely to fail than succeed.
Evaluate other viable alternatives before investing in a project anchored by people new to the sector.
4. Analyze the Market Metrics of tthe Cryptocurrency
The market metrics of the cryptocurrency you’re investing in can give you an insight into whether or not it’s safe to invest.
There are three main market metrics of cryptocurrencies; market cap, trading volume, and supply metrics. You don’t need complex Mathematics here because cryptocurrency aggregators online can help you figure them out.
The market cap is the amount of the cryptocurrency that has been mined. You can calculate the market cap of a specific cryptocurrency by multiplying its price with the amount of the crypto in circulation.
The higher the market cap of a particular coin, the higher its chances of success. However, a high market cap isn’t the only way to evaluate a cryptocurrency’s success.
Trading volume is the number of crypto investors have traded within a particular time. A coin with a high trading volume signifies that many investors trust it and will likely have high stability and liquidity. On the other hand, a crypto with a low trading volume is a red flag.
The supply metric is the amount of crypto that can be in circulation. It’s a decent way to evaluate the potential scarcity of a particular cryptocurrency and help you make better purchase decisions.
Understanding these market metrics and using them to your advantage will help you make more informed decisions.
5. Analyze the Whitepaper
You should avoid investing in a cryptocurrency project unless you’ve analyzed the whitepaper. The whitepaper is a guide telling you about the project and how it works.
You’ll find information concerning the project’s mining structure, consensus mechanism, and network architecture.
A cryptocurrency project without a whitepaper or with a poorly written one is a red flag. Also, if you read the whitepaper and you’re unimpressed with your findings, you can explore other projects.
Be careful because some fraudulent projects might copy the contents of other whitepapers to attract unsuspecting investors.
6. Utility
The top cryptocurrency in the market now has a particular problem they’re solving for their users. Whether it’s a smart contract platform like Ethereum, a payment option like bitcoin, or and utility token, it has to fall into any of these categories.
A coin that doesn’t have a defined purpose that it solves is a red flag.
Conclusion
These are the six tips to evaluate a cryptocurrency project before investing in it. There are many other aspects of a cryptocurrency project that can give you an insight into its genuineness.
However, understanding the six tips in this article will help you make better investment decisions.
Do join the crypto comversation today
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