10 ways to research cryptocurrencies

Valuation methods for cryptocurrency differ from other assets such as stocks and bonds. To analyze a cryptocurrency , it requires looking into several aspects. Also given that the crypto market is unregulated, new and uncertain, its is mainly influenced by emotions of the participants. (traders and investors) It is still important to fundamentally research cryptocurrencies before investing .

The order of the elements being checked is not particularly important and it is advisable to stop the analysis and move on to another cryptocurrency when several elements are problematic. The variety of different cryptocurrencies and projects in which it is possible to invest is not an obstacle at all. Below are the most important elements to research for while doing the fundamental analysis of a cryptocurrency.

Value proposition

In a nutshell, what is the value proposition of the project? Is it promising and does it have a future? What is the size of the potential market?

Market capitalization

Calculate the market capitalization to get an idea of ​​where the cryptocurrency lies and therefore the possibility of growth. Market cap is calculated as the number of tokens or coins in circulation multiplied by the market price of each token or coin. This information is readily available on CoinMarketCap.

Volume
It’s good practice to check the volume of the cryptocurrency you’re researching to make sure you don’t have liquidity problems if you decide to trade it.

Inflation
In most cases, inflation is needed but there will be a problem if inflation is too high. It is possible to see on CoinMarketCap the number of coins in circulation and the maximum number. For most cryptocurrencies, the annual inflation rate can be calculated as follows: number of coins in 1 year divided by the number of circulating coins. The number of coins in 1 year is calculated with the reward of each block and the interval of it.

Competitors
Like most markets, it is important to research the competitors to see where the project lies against its competitors. In other words, evaluate if the project brings something new or if it’s only a copy of other projects.

Functional product
Does the product or cryptocurrency already have real life application? If not, how long will it be before it is the case?

Necessity of a coin/source of income
Does the project really require a token or a coin? It is also good to question the origin of the value given to the token. In some cases projects decide to burn tokens with their profits, which reduces the supply and makes the remaining tokens more valuable. If there is nothing that adds value to the token, it’s hard to think of it as a good investment.

The community
Several different options are possible to assess the size of the community and the public interest. First, it is possible to check the number of followers on different social networks: Reddit, Facebook, Telegram, Slack …

The number of followers is important but the growth of these is just as important. Another possibility is to look at the search traffic for the particular project on Google with the help of Google trends.

GitHub activity
If the project is open source, it will be possible to check the progress of it on GitHub. Does the project progress as planned on the roadmap? Can competitors are able to progress more rapidly?

The team
Verifying who’s the team behind the project is essential. How many people ? Do they have experience in what they are trying to achieve? What is their history, in crypto and elsewhere? Have they been involved in shady events in the past? Do they have a history of success?

The team is one of the most important elements.If too many things don’t sound right at that level, it will be better to avoid this crypto completely.

To sum up, it is extremely important to properly research cryptocurrencies before investing your hard-earned capital. Given that the market is young and poorly regulated, many scammers are trying to seize some of the huge pie that is the growing cryptocurrency market.