8 Tips To Identify A Promising Crypto Investment

In the volatile world of cryptocurrency, investors need to evaluate each option before investing their hard-earned cash. There are currently thousands of different cryptocurrencies on the market, making it tough to determine which ones have any promise. You may have just found the next 1000x crypto where you can grow your investment 1000 times, or you may have stumbled upon a project that is sure to disappear as suddenly as it arrived. 

With this guide, you’ll receive the 8 top tips to identify and evaluate cryptos so you can make an informed financial decision to maximize your investment. 

1. Check The Cryptocurrency’s Website

The first step in assessing the potential of a crypto project is to visit the project website. The website should be user-friendly and easy to navigate, providing you with all the information you need about the currency. 

When scouring the website, look for the following:

- Up-to-date information: It needs to contain the latest information, values, and news surrounding the currency.

- Information about the team: Make sure there is an “About Us” section that provides info about the team members, their backgrounds, and their qualifications. 

- White paper: Make sure the white paper is available. This document provides project details, goals, and strategies. 

- Project objective: The website should define the objective of the token.

2. Review Social Media and Crypto Community News

It is unlikely that you’ll be the first person to come across a specific cryptocurrency, which is why it is always worth it to turn to social media and community forums or news networks to see which information is already out there. 

Check whether the project has any social media channels (Discord, Twitter, and subreddits) and monitor how the community engages with the project. An engaged community is usually a good sign. 

You should also review how the project is reflected in the news. Positive news coverage means that there will be more interest in the project, and more investment potential. You need to also be wary of too much (false) hype around a project that has no substance. 

3. Read The White Paper

The white paper, which can be downloaded from any reputable cryptocurrency website, provides details about the project’s use and tokenomics. 

White papers can be quite technical, especially if you’re new to crypto investing, but there are some key factors you need to look out for in these documents:

- Utility: Does the white paper detail the demand and utility of the tokens, and which problems the project aims to solve?

- Preliminary roadmap: Is there an outline of the growth and development stages for the project, and any long-term milestones?

- Distribution: Are there any details surrounding how the tokens will be distributed to investors? Is this distribution model transparent and fair?

With this information, you will be able to make an informed decision whether the crypto investment will be a financially sound one. 

4. Examine The Current Market

It is vital that you examine the current market and specific metrics to gain insights into the investment’s potential. When considering the market, make sure to evaluate these metrics:

- Trading volume: This metric is how much investor activity there is in the currency. A higher trading volume means more price stability and liquidity. 

- Market capitalization: This is the stability and relative size of a cryptocurrency. A higher market cap is usually a positive sign, however, you need to also consider other metrics. 

- Supply: Briefly check the total supply of a coin (more on this later) and make sure you understand how scarce/abundant the coin is and how this supply impacts its current and future value. 

- Ratings: There are several platforms that provide cryptocurrency ratings. These ratings can be helpful in determining the investment risk.

Reading community forums and financial blogs can help you stay on top of the latest market conditions. 

5. What Is The Price History And Current Value?

It is crucial that you consider the current value as well as the price history of the cryptocurrency you’re interested in. This will provide you with insights into its trajectory and potential volatility in the future.

Historic performance does not always reflect future potential, but by understanding past trends you can make smarter decisions. Ideally, you want to see a steady price increase, and no sudden spikes and drops in value. 

The current value is also important. And value does not only reflect the monetary value but also intangible value, like an NFT that has sentimental value to you. Odds are, if something holds value to you, other people will feel the same. For example, an NFT created by your favorite musician or artist allows you to support their career while making a sound financial investment.

6. Determine Whether The Crypto Has Potential For Adoption

Even if you determine that the crypto has value, you also need to evaluate its utility and potential for adoption. Does the project solve any specific problems or offer unique value in the blockchain?

Cryptos with real-world use and widespread adoption potential usually hold their value for a long time and see real growth. 

Check whether the project you’re considering has partnered with any well-known businesses or whether they offer any features that make them stand out in the competitive market. 

7. Check The Supply

As mentioned briefly, the supply can provide you with a good estimation of the growth potential. Cryptocurrencies commonly have a maximum supply. Once reached, there are no new tokens, and the price will increase if there is sufficient demand. 

When considering the promise of a project, check the total supply and circulation.

8. Who Is The Team Behind The Crypto Project

The project website should provide details about the team and their qualifications. You need to assess the team members and consider their experience, backgrounds, and skills. Do they have the potential to grow the project from initial concept to global success? If possible, go to their LinkedIn profiles to analyze their work history, education, and any previous projects they were involved with. 

Also, consider the team’s past achievements as a whole. Have they ever launched any crypto-related projects, or do they have any start-up experience? 

If they have a successful track record, you can assume that this latest project might also be a success.