Investing in a new crypto project is exciting, but first you have to do your homework, says Dmitry Mishunin, founder and CEO of the security and analysis company DeFi HashEx.
Crypto projects can be a profitable investment, but there is always a risk of losing your money with them for various reasons. They can range from internal work to a complex cyber attack. If you want to ensure a decent return on your investment and protect your funds from losses, it is very important to do your own research on crypto projects before investing in them.
Let’s look at some of the things you need to pay attention to in order to invest your money wisely and in a good project.
Investing: The steps to choosing the right crypto project
1. Examine the project website, the white paper and the roadmap
Here you need to look for clear answers about what the benefits of the project are, what its scope is, and what goals and long-term plans it sets.
2. Investing: Research partners.
In this step, you need to look at the funds and other projects that have supported the project. You can first check this on the project website, then check this information again. If you do not find reputable funds that have supported the project you are evaluating, this may be a reason to refrain from investing your money in it.
3. Investing: Security audits
Then find information about the project’s MVP and security audits. If the project has done one or more audits for its product, this information will be easy to find. Intelligent contract security auditors typically publish audit reports on their websites, and links to these reports are also available on project websites.
Here, too, it is important to pay attention to the choice of auditor, because some auditors are not as professional as others. If you see that the audit was done by an unknown company, this may be a cause for doubt. However, if the audit is performed by a reputable auditor of the highest level, this is a positive sign of the project’s commitment to its stated purpose.
4. Check the project pages on social networks
Here you will need to analyze the project community on Twitter: see how big and committed it is. Also, try to go through the followers and see if some influential people are following the project.
Then check the average project account. There you will be able to see how professional and committed the project team is by looking at the articles they publish there.
If you see that the project community on Twitter is active and growing gradually and the team makes regular updates to Medium, that’s a good sign.
5. Check if the project has an ambassador program
This allows community members to become ambassadors of the project and promote its mission and presence. If the project is not serious about staying in the long run, he will probably not bother to make a program for ambassadors.
6. Investing: Check the Test Nodes
Then you need to check if the project has its own nodes to test their product. The units allow you to test your product with higher efficiency, so their availability is a good sign in terms of the seriousness of the project.
7. Study the team
Check out the social pages of the project’s top management on Linkedin and Twitter. Most good projects have teams that are transparent with their social networks. Check their previous professional experience, compare this information with what they do within the project.
8. Survey of competitors
Find the competitors of the project and try to compare the project you are analyzing with them. Try to identify the strengths and weaknesses of the project. This will help you decide if the project has enough advantages to choose from others.
9. Distribution of tokens
Find information about the distribution of the project token: the distribution and acquisition period for the team, the distribution for different investment circles and the price of the token. You will also need to know what acquisition period is provided for investors and on which platforms token sales will take place.
10. Select the circle
If you have decided to invest in a project, now you need to choose the investment circle in which you want to participate. Try to find the right balance between the entry price and the amount of investment.
11. Risk management
If you want to invest part of your capital and diversify your portfolio, you need to determine the share of your portfolio that you are willing to dedicate to the project in question, taking into account your overall investment strategy.
Investing: closing thoughts
When choosing an investment project, only the investor knows what suits him best. That’s why you should always do your own research on the projects you want to invest in and try to do it diligently. Try to stay cool and not get carried away by the impression that the project is trying to create from a marketing point of view.
We’ve covered some of the most important elements of any project you need to evaluate above. By devoting a reasonable amount of time to some basic research, you will be able to gain a fairly decent understanding of how much the project you are considering is worth.
Also, follow common sense and be disciplined by following your profit / risk strategy as you make your investment decisions. And remember that long-term success in investing largely depends on how disciplined you are in implementing your investment strategy.
About the author
Dmitry Mishunin is the founder and CEO of an intelligent audit company HashEx. He specializes in cybersecurity and security audits and product development in Ethereum, bitcoin, a blockchain of Binance. HashEx conducted more than 500 audits of projects at various levels and helped preserve more than $ 5 billion in investment funds.
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