Investing in a new crypto project is exciting, but you should do your own research first. Advice from Dmytro Mishunin, founder and general director HashEx.
Investing in a crypto project can be very profitable, but you should never rule out the possibility of losing your money due to mismanagement, a well-designed cyber attack, or other factors. So, if you want to get a good return on your investment and protect your funds from possible losses, you should do your own research before investing in any crypto project.
Let’s go through a list of things to check together before investing in a crypto project.
Investing: Steps to follow to choose the right crypto project
1- Study the project website, white paper and roadmap
First, you should have a clear idea of the utility of the crypto project, its scope, as well as its long-term goals and plans.
2- Look for project partners
At this stage, you must find funds and investors who have supported the project. You can find this information on the platform’s website, but don’t forget to double-check it. If the project is not supported by reliable and reputable partners, you may have to move on.
3- Read security checks
Next, learn about the project’s Minimum Viable Product (MVP) and its security checks. If a crypto project has already completed one or more audits of its product, you should have no problem finding this information. Smart contract security auditors usually publish audit reports on their websites. Links to these reports are usually available on official project websites.
It is also important to pay attention to the choice of auditors. Indeed, the latter are not all as professional as each other. If you see that the audit was conducted by an unknown company, you should ask yourself a question. However, if the audit was conducted by a well-known major auditor, this is a pretty good sign.
4- Follow the project on social networks
Here you need to analyze the project community on Twitter: how big is it and are participants involved in it? Also try looking at the list of subscribers and see if any influencers are following the project.
Then check out the project’s Medium account. In this way, you will be able to review published articles to assess the level of professionalism and involvement of the project team.
If you see that the project’s Twitter community is active and growing, and the team regularly shares news on Medium, that’s a good sign.
5- Check if the project has an ambassador program
This type of program allows community members to become ambassadors for the project and promote its mission and image. If a crypto project doesn’t plan to grow in the long term, it probably won’t bother to create an ambassador program.
6- Check test nodes
Next, you need to check if the project has its own test nodes. They allow you to test the product with greater efficiency, their presence indicates the seriousness of the project.
7- Study the project team
Check out the LinkedIn and Twitter accounts of the project’s senior management. Indeed, most good projects have transparent teams that do not hide their social networks. Check their previous work experience and then compare that information with what they are doing on the project.
8- Conduct competitor research
Find competitors of the project and try to compare it with the crypto project you are studying. Try to identify his strengths and weaknesses. This will help you determine if the project offers enough benefits for you to choose it.
9- Analyze token distribution
Try to find information about the project’s token distribution: the distribution and the lock-in period imposed on the team members, the amounts spent in each of the investment cycles, as well as the initial price of the token. You will also need to have an idea of the minimum lock-up period, its type and the platforms on which sales will take place.
10. Choose the right financing cycle
If you have already chosen your crypto project, now you need to determine the funding round in which you want to participate. To do this, try to find the right balance between the initial price and the investment amount.
11- Think about the risks
If you want to invest some of your capital and diversify your portfolio, you need to determine how much you are willing to allocate to the respective crypto project. For this, you need to think over your investment strategy.
Investments: the last tip
Finally, know that it all depends on your preferences and needs. Therefore, you should always do your own research on the projects you want to invest in and try to approach it very carefully. Also, try to take a step back and not fall for crypto project marketing campaigns.
In this article, we have shared with you the basic steps you should take before investing in any crypto project. However, by taking the time to research, you will better understand the utility and value of the project you are interested in.
Of course, use common sense, stay disciplined, and keep your risk/reward strategy in mind when making all your investment decisions. Finally, remember that long-term investment success depends largely on the discipline with which you apply your investment strategy.
About the author
Dmytro Mishunin is the founder and CEO of the auditing company Smart Contracts HashEx. He specializes in cybersecurity and security auditing, as well as product development on the Ethereum, Bitcoin, and Binance blockchains. Since its launch, HashEx has conducted more than 500 audits for projects of various levels and helped preserve more than $5 billion in investor funds.
All information on our website is published in good faith and for general information only. Any action taken by the reader based on the information found on our website is done solely at the reader’s own risk.