Cryptocurrency is an exciting technology. One can hardly turn around without hearing some story about someone who held X coin or token and flipped it into a 10x, 100x, or even 1000x gain. This may lead one to launch head-first into coins that sound good and promise the world, but end up losing what is invested. Nothing in life is certain. That goes for cryptocurrency as well. However, if you do your own research, you can mitigate the risks to a degree.
Tips to Help Research
1. Know Who Runs the Project
2. Read the White Paper
Any project worth its salt will have a white paper. A white paper is basically the technical plan that a crypto project has and features details, diagrams, schematics, and other material that explain the purpose of the project and its technology. It is not necessary to understand every single facet of the project that you are interested in, but you need to be sure that the people you’re about to invest in DO. If the white paper seems to describe a proper problem and the white paper and the project’s solution seems to be a good one, that may seem like a solid reason to invest. For an example of a white paper, you can read Brave’s white paper.
3. Check Which Exchanges the Project Is On
Often, a good indicator of if a project is not simply vaporware or a scam is to see how many of the major exchanges it is on. This is not a bulletproof gauge, but if the project is on sites like Coinbase, Kraken, or Binance, it is less likely to be a scam because the big exchanges have public relations reasons not to allow random coins on their platforms, for starters, and are more selective about the projects they allow to be exchanged on their platforms. For example, even though CoinGecko reports that there are about 6,500 crypto projects out there, Coinbase only lists 45 projects that they will let you buy. Basic Attention Token is currently on all major exchanges, as far as I’m aware.
4. Read Forums Discussing the Project
A good source to get a feel for the project in question is to find forums that are talking about the project. Reddit would be such a place. If the project is big enough, there will often be a subreddit for it. These may fall under official or unofficial subreddits. Try to read both and pay attention to the users there who seem knowledgeable and even-keeled. The people who will tell you the best of the project and the downsides of the project. You don’t need to waste your time with mindless cheerleaders.
No matter how prepared you are, investing is still a leap of faith. It doesn’t matter if it’s the stock market or cryptocurrency. However, with these tips, hopefully you will be able to make the most educated guess that you can make. Good luck!