You must have all heard by now the term DYOR (
do your own research), but maybe you are wondering how exactly to that when investing. So i figured that i'll post and example of how i do my own research and what i am looking for in a coin fundamentals.
What do you need to know when investing?Project itself (and the technical solution they offer):Read the project white paper and start by asking yourself: "What problem does this solve?". Many projects are solving made up problems that can be solved with databases, or they have been solved already. They don't need a bulky blockchain. Some projects just put the word "blockchain" in there because it's a buzz word for easy funding from gullible investors that are incapable of doing research themselves.
New coin projects are rarely needed, and forming secure blockchain is not easy task, these projects have high change of 50% attack and are clumsy and costly way to store a ledger. So ask yourself, why new blockchain is needed?
New token projects can be either security tokens or utility tokens, or in some cases both. Security token projects can be shut down by SEC as selling unregulated securities and many of them have already been shut down. So you do have to keep an eye if the project is complying with regulators.
Most of them are not. These projects are mostly centralized by default. And even if they are complying with regulators, tokenizing enough assets to have an impact requires huge partnerships to work.
Tokenomics/coinomics:When investing to ICO/IEO, you have to pay attention to tokenomics. This means that you have to study if the investors get a fair share of the tokens and is the project giving up too many free tokens that will devalue the poject. Always check their bounty program and the percentages they give to bounty. Bigger the percentage is, more likely it is the project to tank at the moment they list. More % they give to investors the better valuation will investors have for their money. If they give any discounts to any group of investors (early etc) that's always a red flag, because investors want to be treated equally. Giving percentages to advisors can be a bad thing too if advisors have no real use case. They might be just worthless influencers and dump on the project when they get bored.
During the IEO/ICO money rising phase it's also important to know what's the hard cap of the project (max cap on the money they are rising). Putting hardcap too high tells me that project creators are greedy and they don't care if the project value tanks. It's way better for investor to invest into something that doesn't have unreasonable high marketcap valuation from the start. These mid/low-cap projects tend to have room to grow and more value for investor's point of view.
Token issuance rate is important to know. This is an example of a horrible idea ->
(source:
https://research.binance.com/en/projects/solana)
In SOL's case, the value will most definitely crash in the start of year 2021 when new tokens flood the market and fast inflation crashes the price.
Sometimes the project tokens are place holders until the real blockchain comes in. If the project gets own blockchain, you need to check the plans for the mining reward rate and max supply as well.
Team research:Ceo should have always have a strong background in coding, it means he/she is knows what's really happening on the project development, CEO who doesn't have coding coding is a sign of a failed unnatural hierarchy. Any good project has always got coders in charge.
All members in the team should have a good reason to exist. Having unbalanced team with too many marketers or advisors is bad. When it comes to coders you should also check their github activity. In general, you should google every team member and their track record. Bunch of failed projects in the history tells me that they are not finishing up what they started. Once i did a background check to ceo and found and found seemingly unrelated article where i found out that the ceo already abandoned our project in secrecy, i sold my coins and shared my findings with the community and the price tanked hard.
If members are anonymous/pseudonymous, just avoid the project. For latest example - Google "Bruno+Block+oyster"
Community:For older projects you are looking at the community. And by community i am not talking about the number of members in the telegram, those mean nothing. I mean active talk about the project itself, not only about the project price but the tech and look for people who are forming local communities, asking how they can help and finding their way to support the project.
Future/past:Then you are looking at their future plans and track record. If the project development is dead, the investment isn't probably a good idea. If they are building something, look from the github that how many people are actually building it. Just one developer isn't enough.
Competition:Always, and i mean always check the competition. And by competition i mean the projects that are trying to solve the same problem as your coin. You can't trust one community on this, they will have biased arguments and you should hear the both sides because every project has supporters who will defend and fight to the teeth on why their product is superior. And even if the project is superior, that's not enough by itself for creating a standard. Google Betamax vs VHS if you need an example.
Marketcap:Remember that if you are looking for huge gains, i mean 100x gains, you can't assume that high marketcap coins will do that for you, not very fast anyway. Low maketcap coins have way more room to grow and when they do they rise fast and high because it doesn't take that much money. Low marketcap coins are the ones where over night millionaires made their fortune. Most of these coins aren't lowcaps anymore, but they were. That's my point.
Nothing more comes to mind right now, if i remember something essential, i'll update the article if i can.
Ps: This article is not about trading but investing. In trading you should be focusing more on TA then fundamentals.17.8 edit: fixed typos
Anyway, other things I look at when looking for a good project to invest with is a real team and one that are active in communicating its investors and followers. Looking into the whitepaper is my 2nd filter in choosing the best project to invest with. 