How to Decide if a Cryptocurrency is Worth Investing in
Each and every day it seems like a new blockchain or cryptocurrency is popping up and looking for those initial few investors. Some of these projects go on to make these investors money, while others are a total loss. So, how do you pick?
Whether you are new to crypto investing or just starting out, keep reading to learn some tips on how to tell a winner from a dud when it comes to cryptocurrencies.
How to Evaluate a Cryptocurrency
Do note that we recommend following all of the steps on this list before placing an investment in any cryptocurrency or project. That being said, investing in cryptocurrency is a personal decision, and you will have to come to your own conclusions. We recommend discussing any potential investment with someone you trust (even after following this list) before investing.
1. Take a Look at the Website
Almost all cryptocurrency projects have a website, and websites are insanely easy to make. Therefore, don’t be fooled, even if it looks fancy.
When you get to the website, you will want to look for and look at the following items:
· Listed individuals involved in the project (preferably with LinkedIn links)
· A list of objectives
If any of these four items are missing, then we advise against investing in the project. Additionally, you will want to ensure all the spelling and grammar in the text are correct. If there are a lot of errors, or something reads off, then likely the project isn’t legit.
2. Read the Whitepaper
Just having a whitepaper isn’t enough. Thanks to AI, lots of scammers can generate their own false document, even if they have no blockchain knowledge at all. Be sure to open the whitepaper and read it to ensure you understand the purpose of the project.
If you are an investor but not knowledgeable about the technical side of crypto, we recommend hiring someone who is to review the paper before parting with your money.
3. Check Social Media
It’s rare that a cryptocurrency launches without a social media presence, and that’s likely how you found this project in the first place. Before placing an investment, scroll through their social media and ensure the person posting seems informed and knowledgeable.
Additionally, see how others on social media feel about the product. If people are complaining on socials about the company, then you are better off to avoid investing at all costs.
Here are some platforms to check:
· X
· Discord
· Threads
Related: WARNING: New Crypto Scam on Telegram
4. Verify the Individuals Behind the Project
If social media seems to talk about the project highly (and we are talking more than just ‘I like this crypto’), then head back to the website and go to the list of the individuals involved in the project. Most reputable projects will have options to contact the individuals (such as LinkedIn or an email address) as well as a picture of the individual.
If there is just a list of names, this is your first sign that the project isn’t on the up and up, but this could also mean they are still developing their website. Take things a step further and search for the names on LinkedIn or another social media website and see what comes up.
If you can’t seem to find the individual, or the profiles you do find are nearly empty, then run.
5. See How the Cryptocurrency is Doing
Now, if the project hasn’t launched yet, you can skip this step. But, if the project is already available, then head to a cryptocurrency trading platform or metrics website to see how the coin is performing already.
Many individuals like to invest in large market cap coins as they think they are less risky, but we don’t always find this to be the case as thanks to social engineering scams, many individuals can get caught up in a scam coin just because a celebrity promotes it.
Instead, we recommend looking at the trend of the coin. Does it seem like a lot of people buy then immediately sell(a graph that looks like mountains?) This can be the sign of a pump and dump-scam.
It’s better to look for a cryptocurrency with a steady increase in growth that moves slowly but always in a positive direction. This is a sign of a growing cryptocurrency that is also stable enough to likely be a safe investment.
Make sure that any graphs you look at are set to “all time” or at least “one year” instead of the automatic trading of a single day—this isn’t enough time to truly evaluate the trajectory of an investment.
6. Look At Who Owns the Crypto
This one can be confusing to new investors, but know that the creators of most cryptocurrencies (whether they are backed by a company or not) reserve some of the tokens for themselves. Generally, an honest company will hold no more than 50% (hopefully less than 30%) for themselves.
If you see a token in which 70% of the market capacity is reserved for the creators, do not invest. A large portion being reserved by founding members means they could manipulate the market in the future—meaning your investment could become worthless overnight.
Overall, we hope by now that you have a good understanding of how to tell when a cryptocurrency is legit. If you are still worried about a potential investment, ensure you ask a friend or family member to give their insight before investing.
If you found this article too late and have already lost money to a scam investment, we are sorry. We hope that in the future, you won’t have the same experience when you follow these tips. Please additionally take the time to report the fraud to the FTC as they may be able to prosecute in the future and return your stolen funds back to you. This isn’t a guarantee, but it is always worth trying!
