Cryptocurrency is one of the best and most exciting technologies of recent years. Some years back, it was barely known, but fast-forward to today, and everyone knows what cryptocurrency does, from your thirteen-year-old nephew to your great-aunt living in the countryside. 

There’s no doubt about it; these days, there seems to be one form of cryptocurrency or the other everywhere you look. An estimate from CoinMarketCap suggests that there are about 2.4 million different cryptocurrencies in the world, and the number keeps growing. 

But in this sea of cryptocurrencies or “sea-tocurrencies”, if you like, how do you know which crypto to invest your money in? Keep reading because you’re about to find out how to evaluate cryptocurrency.

What’s A Cryptocurrency Analysis?

In the finance world, there’s something called Fundamental Analysis. It helps traders and investors determine what to invest in and whether it is overvalued or undervalued. Fundamental analysis, in the simplest terms, is the process by which the intrinsic value of an asset is determined.

When it comes to the world of Crypto, fundamental analysis is done a bit differently. But don’t worry, this is not a “Cryptocurrency technology explained course”. Since crypto assets don’t usually have historical data, such as the history of earnings or profit and loss statements, a different approach is used. 

Instead of historical factors, crypto assets are evaluated through a check on factors such as their use cases, their network, the team developing the network, and other factors. All of these can point you in the way of the right crypto for you, so let’s talk about them.

How Can You Spot A Good Cryptocurrency?

Check Out The Whitepaper

A whitepaper review crypto users can easily understand is essential for analyzing cryptocurrencies. Every crypto asset has a whitepaper that contains most of the information about it written in black and white for you to see. The whitepaper will contain information such as the objectives, vision, mission goals, strategies, and functions of the asset. 

All of these things should be in the whitepaper of a legitimate cryptocurrency. You should be wary of any cryptocurrency that does not have its whitepaper. 

Find Out Who’s On The Team

Any project is only as good as the people building it, and the same goes for cryptocurrency projects. Cryptocurrencies are usually created by a team of blockchain experts and developers. Hence, who they are matters to the project they created.

One of the glaring cryptocurrency red flags you might encounter with a crypto project is if the team is anonymous. Another is when the team members are inexperienced or unqualified. You don’t have to run full background checks on each member of the team to do a crypto team evaluation. A simple review of their LinkedIn profiles may tell you all you need to know about them. The cryptocurrency’s website should also contain details about the team members. Many of Ethereum’s members are well known all over the internet.

Look At The Leadership

Learning about the project team is important but not enough. Apart from the team, another set of people you need to know about is the project's leadership, namely its founders and executive members. 

These are the people who make the big decisions about cryptocurrency, including its financials, marketing, and execution. The success of the entire project has a lot to do with the people who call the shots. 

Make sure to find out as much information about these people as you can and consider their past work and reputations. Your money could be on them.

Get To Know The Community

One thing that separates crypto projects from other TradFi projects is the heavy involvement of communities. Most crypto projects usually have active communities built around the project and those communities can help you learn a thing or two, or more about the cryptocurrency.

Most communities are open to the public through social media groups and channels such as Discord, Telegram, and even X. The level and frequency of activity in a cryptocurrency community can tell you whether or not the cryptocurrency has the potential to grow.

However, apart from the frequency and level of activity, you should also look out for the kind of activity in those communities. A standard community should host discussions on improving the blockchain and other similar technical talks, but if the community seems to focus only on hyping the cryptocurrency, the project might not be legitimate. 

Understand the Technology

It’s no secret that cryptocurrency is quite technical, especially with all the crypto jargon that is used in the crypto space. Sometimes, it can be hard to grasp the full details and perform a proper blockchain technology analysis. Still, it is important to understand the underlying technology behind any cryptocurrency you’re willing to invest in.

You don’t need to know too much, but details such as what the token is, what the blockchain does, how it’s maintained, and how users interact with the blockchain would serve you well in making an informed decision. A good example is Ethereum’s website which contains so much detailed information about the cryptocurrency.

See The Vision

Every project should have a vision it’s following and a direction it’s heading towards. This means that there must be a definitive purpose that is well organized and clear for everyone to see. So, it would be easy to determine whether or not the project is staying true to the path drawn out for it. 

If you can’t see the vision of a cryptocurrency project, then you are only blindly hoping that it will become profitable without any guarantees. Isn’t it better not to follow the blind?

Learn About The Tokenomics

Tokenomics is one of the many cryptocurrency jargon terms some people are unfamiliar with. But you’ll find tokenomics explained here. Cryptocurrency tokenomics are the economic principles that regulate many aspects of the cryptocurrency, including its distribution, circulation, and supply. 

You need to know about these principles and conduct a cryptocurrency market analysis because they affect the price and long-term viability of any cryptocurrency. Knowing them will help you make informed choices about your investment.  

Review The Roadmap

A roadmap contains the foreseeable future of cryptocurrency and the plans the leadership has for it. It usually includes all the specific goals and timelines outlined for achieving them. 

A proper cryptocurrency roadmap review can help you see the clear path outlined for the project and whether the vision for the project aligns with your philosophy. It also helps you see how likely it is that the project will succeed after all. 

You can make nuanced evaluations, such as whether the goals are too generic, whether or not the goals listed in the roadmap are realistic, or you can trace the goals to see if they are poorly planned or not. All of this information can be highly beneficial in helping you determine whether or not a cryptocurrency is cut out for long-term success.

How Can You Avoid Scams?

As wonderful as cryptocurrency is, there is also no doubt that some bad actors have used it to scam and defraud people out of their money. There are several cryptocurrency scams to avoid, and although some are difficult to spot, many have been identified over the years. 

All you need is a simple google search  to discover major scams such as Onecoin, Bitconnect and QuadrigaCX that were worth billions of dollars and affected millions of people.

The first step in avoiding scams is to do a thorough cryptocurrency analysis by following the above steps. If you do your due diligence, you will be able to fish out the fake projects among the original ones, and you will be less likely to fall for scams. But here are some other tips that can help you avoid becoming a victim. 

Do Not Share Your Information, Ever

There is never going to be a need for a developer or anyone from your cryptocurrency’s project team to contact you and request your personal information such as your username, password, or ins. 

Never share any of this private information with anyone, no matter how real they portray themselves.

Only Use Reputable Regulated Exchanges

The best feature of decentralized exchanges is that they preserve your anonymity, allowing you to connect with others without needing to input any personal information, although this feature is also risky. 

Centralized and regulated exchanges, on the other hand, will require you to verify your identity for registration. This generally adds more protection than decentralized exchanges offer. 

Be Careful On Social Media 

If there’s anywhere scammers love to come out and play, it’s social media. Scammers love to pull different kinds of scams on folks on social media, from pretending to be a blockchain official to offering you mouth-watering opportunities. They may even want cryptocurrency investment tips. The Federal Trade Commission advises that you beware of anyone claiming to be a love interest on a dating app, or trying to offer crypto services. Legitimate officials from your blockchain will only contact you through official means. 

When it comes to cryptocurrency, there are many things to look out for and factors to consider before deciding the best crypto for investment. It might sound stressful going through all these steps, but you can’t be too careful. Suppose you’re planning on making a good investment. In that case, you’d want to pick a viable cryptocurrency, and there’s no better way to find out what’s viable than with a good ol’ cryptocurrency analysis. 

Also, remember to watch out for scams. It’s not good enough to analyze whether you will end up falling for a scam. Now that you know how to research crypto projects, we hope you will always stay on top of your game and crypto.

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