Cryptocurrency analysis requires a proper understanding of how a cryptocurrency operates in the ecosystem. It also involves evaluating a cryptocurrency, which requires roadmaps and developers with deep knowledge and experience. However, in the age of rampant cyber attacks and financial scams, users need to be aware of and reduce their vulnerability. This requires analysis, where users must know about the projects and vision of the cryptos. These are some of the common ways of analyzing a cryptocurrency and understanding the details of the project.
Common Methods of Cryptocurrency Analysis
There are scores of altcoins available in several leading cryptocurrency trading platforms. It is therefore necessary to differentiate between a genuine cryptocurrency which can yield good returns from the risky and vulnerable ones.
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Crypto Community Awareness
Most cryptocurrency projects need a supportive cryptocurrency community to grow and evolve. Therefore, while choosing a cryptocurrency it is necessary to gauge whether the project has a fair chance of success or is mostly speculative. You can join social media channels for better insight into the project details of the crypto community. If the cryptocurrency project has a large community base, has clear promotional strategies, and is overall well-organized, then the chances of success are higher.
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White Paper Review
A white paper helps outline the objectives and goals of the cryptocurrency projects, blockchain technology, and roles. For example, the company Solana has a white paper that explains the purpose of a token and how the blockchain will work. A white paper also is useful for investors as it highlights how a cryptocurrency will function with blockchain technology. Some cryptocurrencies may have relevant details that often match the contents of a white paper. In case, there are neither any details nor any separate white paper, then it is quite certain that the cryptocurrency will not yield much and its credibility is doubtful.
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Team of Founders and Software Developers
Users using a brand-new cryptocurrency should adequately research the team involved in developing it. One should research the professional experience of a project team and review the profiles of founders and software developers well. The “About” section of a website should articulate what is helping the project and what is the expertise and expectations. The most common red flag is if the profiles are anonymous and the details about the team are scanty. Users should also be wary if the research team does not have any relevant prior experience.
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Leadership Lesson
The popular cryptocurrencies and cryptocurrency trading platforms in India such as Valco Trading have robust leadership. It is also true that crypto projects have the potential to make a difference in how the team manages the marketing, financials, and execution of a project. If the leadership is strong, then there are better chances of a crypto project’s success. The questions that should come to mind while researching a project are as follows.
- Are the leaders anonymous or are their profiles public?
- What is the brief history of leaders or members in influential positions of the project?
- What is the experience of leadership in the crypto industry?
However, some cryptocurrencies have anonymous founders. Bitcoin is a notable example. Despite that, while doing cryptocurrency analysis, these questions are necessary.
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Technological Understanding
Indeed, many users may not know every basic detail about blockchain technology. However, they should learn to have a basic understanding of how blockchain works. It can make them aware of the original intention of the crypto project. This knowledge alone can give a glimpse into the feasibility and success of the new cryptocurrency. It is also worth noting that one need not become an expert in blockchain technology to know or accurately predict the intentions of the technology.
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Tokenomics
Studying the tokenomics of the cryptocurrency token can give users a holistic understanding of the distribution, supply, and circulation of the cryptocurrency. Subsequently, the users will start understanding the dynamics of demand and supply, the company’s shares, and the maximum supply of the token. From the perspective of investors, circulation, total supply, and maximum supply will help them understand the price ranges of cryptocurrency better.
Tips To Avoid Cryptocurrency Scams
Once you as a user have analyzed the new cryptocurrency, here are some additional tips to avoid cryptocurrency scams.
- Do not share your private information with untrustworthy exchanges and developers
- Look out for the best cryptocurrency exchange in India
- Keep track of the cryptocurrency news and trends
- Verify Apps
- Guaranteed or fixed returns on cryptocurrency are impossible
- Choose regulated Initial Coin Offerings (ICOs) only
Final Thoughts
Cryptocurrency analysis of new cryptocurrencies is vital to ensure that the returns are high and avoid financial scams. Therefore, users must verify and study all the available information about the digital asset. It is also crucial to have a bird’s eye view of the functioning of the cryptocurrency along with its possible valuation. White paper and other crypto-related information can give a holistic picture of the details of the coin. Additionally, once the analysis is done, users should follow basic tips to avoid getting duped.