Analyzing crypto projects is one of the most important steps any investor should take before making an investment decision. The media space is full of information about web-3 and cryptocurrency projects: their teams make active and multi-directional efforts to attract capital. Airdrops, bounty programs and guest celebrities draw users into the seductive world of startups.
Extensive research and in-depth analysis are paramount to making informed decisions and minimizing risk. And an investor is faced with a lot of questions to which it is important to find answers, not only to avoid losing money, but also to make money. Will the technological innovation grow into a product with sustainable profitability? What is the market potential of the cryptocurrency in question? Will the investment be successful, or does the project have signs of fraud and it is better not to trust it?
This article will be useful for those who realize the importance of making informed decisions when making financial investments, and will help to form a comprehensive vision when assessing the current state and potential of a particular crypto project.
Let’s break down the criteria for evaluating the prospects of crypto projects and the main characteristics you should pay attention to before investing money.
Realistic goals and objectives of the project
The general concept of the project, its strategy, goals and objectives to achieve them should be clearly formulated and unambiguous. The future of crypto projects depends on proper planning, and projects with a realistic strategic development plan have a great chance of success.
White paper and roadmap analysis serve as a clear demonstration of how clearly the project management sees the future of the project. Having such documents as White Paper and Roadmap is now a common standard for web3 startups.
The white paper is the foundation of a crypto project. It contains the product concept and a clear vision of the customer problems it solves. The document describes in detail the ideal portrait of the product or service that is the goal of the project. Typically, it includes: technical description, information about the target audience, team, financials, tokenomics and legal aspects.
A crypto project roadmap serves to specify the steps on the way to achieve the goal. Ideally, it is a concrete plan with deadlines (usually some results are planned for a period of 3, 6 and 12 months).
These documents are not subject to any official standards, and each project includes whatever information it deems appropriate. The only requirement that everyone tacitly observes is to be as informative as possible, to clearly reflect the essence, and to avoid “water”. Excessive emotionality or vague wording can be a sign of a “raw”, superficial, or even dishonest project. Even if the idea has already begun to materialize, it is worth paying attention to how the implemented stages correspond to those outlined in the roadmap.
Regarding technology — most Web3 projects use open source software, which is published on GitHub along with a detailed description. This gives the community an opportunity to work together on the product, and the investor an understanding that the project is being developed transparently and has no questionable features. In general, it is better to avoid startups that have not yet started development. The market already had a sad experience with ICOs and crypto projects in 2017. Then, cryptocurrency startups, on the hype and with the help of motivating white papers, “ate” millions of investments that will never return. Therefore, try to choose projects that already have something to show – for example, a startup and at least some number of beta testers.
Tokenomics
Cryptoproject tokenomics provides the rules for issuing, distributing, controlling the number of tokens in circulation and their functionality. From this, an investor can get a picture of how decentralized the product will be, how volatile it will be, and how likely it is to grow. Will there be large holders? Are the incentives good enough to hold and use the tokens? Or will they be more of a speculative tool? When will the crackdown on investors begin? How many tokens will be left in the hands of developers? All these questions should be answered by a carefully designed tokenomics, based on which the investor will be able to assess his chances of receiving income and weigh the risks of cryptoprojects.
Crypto project team
It is ideal if the team leading the project is well known and has skills and experience in developing and launching web3 projects. Profiles of creators and management are available on the website, LinkedIn, Discord and other social networks. Skills, qualifications and reputation of the team members serve as one of the positive indicators of a crypto project’s great development potential.
An anonymous group of people whose history cannot be traced back to past achievements (they may be owners of well-known accounts that do not disclose their names) can be a dubious partner. Therefore, it is worth asking for or gathering additional data about the team’s past activities to form an objective opinion. And remember that scammers know how to create fake pages with bots, baited likes, and fake comments that are impossible to distinguish from the pages of real projects.
Also pay attention to the composition of the participants: it may seem strange if the team is dominated by specialists who maintain the product rather than create it. The problems of marketing, legal and other support are usually solved by the funds invested in the project. The team of a strong, innovative and promising project is primarily focused on creating a unique product, and its structure ideally includes highly specialized technical specialists of the highest level.
Assessing the competitiveness of crypto projects and their market potential
It is necessary to identify as precisely as possible the target segment for which the project is intended. Current market capitalization combined with an assessment of the project’s competitive advantages will help you determine its place in the niche.
For analysis, you should turn to trusted and authoritative sources such as CoinMarketCap or CoinGecko. These resources are aggregators of information about the crypto market, and from them you can learn about the situation in the segment, competitors, get links to social networks, white paper projects and a lot of other useful information. DeFiLlama is an indispensable resource for those who plan to invest in DeFi projects. With the help of these platforms you will be able to perform both technical and fundamental analysis. With the metrics and data provided, you will be able to make an informed and unemotional decision.
CoinMarketCap was created over 10 years ago and is the most popular source of information about cryptocurrencies and other blockchain projects in the world.
The platform provides detailed tracking on the main parameters of assets: current price, capitalization, trading volume, total supply and many other metrics with the ability to track history for the required time period.
A convenient addition to CoinMarketCap is the cryptocurrency calendar CoinMarketCal, which collects important information about events in the world of cryptocurrencies in the form of a calendar. On the site you can find out about hardforks, airdrops, listings, new feature releases, etc. for the coins you are interested in.
CoinGecko is a bit younger than CoinMarketCap (it was created in 2014), and its main advantage is more extensive information about each individual asset. In any case – both resources offer a huge amount of information. And the ideal option will be their simultaneous use when conducting analysis.
Transparency and security of crypto projects
Study investors and partners. Investments in crypto projects should be verifiable. This indicates financial transparency. The presence of large investors in crypto projects confirms their solvency and prospects. Investment funds and institutional investors thoroughly analyze projects before investing in them. Then they support their development in every possible way. Also, cooperation with large legal, media, and technology companies, as well as any partnerships and alliances in the crypto field, play a big role.
The security of crypto projects is maintained through regular audits of the technical infrastructure. Information about these audits is usually published on the project’s website. It can also be found on the web resources of auditing companies.
Community and Project Support
An active web3 project community on the network is one of the key success factors. If the team maintains live communication with the community in Discord, X network (Twitter) and other social networks – it has an open position and forms a user base in the earliest stages of the product’s existence.
The Discord platform holds a special place in the IT world. Started as a social hub for gamers and developers, the platform has evolved over time into a real communication center for web3 projects. The vast majority of crypto projects have their own server on it to communicate, discuss the product and look for collaboration opportunities. With the help of Discord, you can get a more detailed idea of the project’s activity, the community’s attitude towards it and the development team.
Cryptocurrency marketing in general is strongly connected to the community, but depending on the current state of the project, communication with users may be at different stages. Maybe the project is still in the prototyping stage. However, if the team already has an MVP or beta version ready for testing, they can’t do without the help of the community. At this stage, the project is actively discussed: it is either hated or embraced and promoted by the participants. And if the product gets a potentially positive response, that is undoubtedly a good sign.
Regulations
The regulatory requirements of cryptocurrency legislation must be met in order not to expose investors to additional risks. A project must have all the necessary permits and licenses to operate legally, depending on the jurisdiction.
In conclusion
So, before deciding to invest, it is necessary to thoroughly study the potential and risks of a crypto project. The cryptocurrency sector has existed for almost fifteen years, but is still poorly regulated despite the efforts of global legislative bodies. And scammers are not resting on their laurels, giving life to more and more dubious schemes of embezzlement. Therefore, you should not rush to invest in any new project, no matter how attractive it may seem.
It is important to understand that the future of crypto projects depends, among other things, on a large number of objective criteria and factors that can be analyzed using technical and fundamental approaches. Analyzing projects for investment purposes is a real skill that can be mastered. Use a variety of cryptocurrency evaluation criteria and only reputable sources of information to get a true picture.
Choose the right projects and invest safely and profitably!
Thank you for your attention.
AnyExchange is an international exchange company , through which you can convert cryptocurrency at the most favorable rate both in electronic form and in cash. We work all over Ukraine and abroad. Through our platform you can make fast and safe money transfers all over the world.
