From the outside, the crypto scene can seem baffling. There are so many currencies in circulation, and so many horror stories about rug pulls, massive energy consumption and market manipulation that it’s difficult to know where to start.
So how can newcomers get into crypto, and what should you do to check that the assets you’re buying are legit?
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Research is vital
Another step to take before buying any coin is to do your own research into the project and understand more about its aims, its underpinnings, and the fundamentals on which it’s founded. You can do this in several ways, including:
Visiting the official website
All good cryptocurrencies will have a website for would-be investors to check out, and you not only need to pay attention to the content of the site, but also the way it’s designed.
It should look professional, be easy to use, feature good spelling and grammar, boast security features, and also be transparent about who’s behind the coin.
Reading the project’s white paper
Another tenet of launching a crypto is creating a white paper which anyone can read to get the lowdown on what the project’s aims are, and how the founders plan to take it forward over the coming months and years.
While white papers may become overwhelmingly complex in the details they include, they should still break down the basics in an unambiguous way. If there’s no white paper in sight, don’t invest.
Checking social networks
A lot of cryptos are about the community as much as they are the asset itself, and you can explore social channels to see how a token is being talked about, and how the project intends to earn loyal customers.
Assets with a large following and a healthy community of members and moderators are attractive. You want to know that if you’ve got a question, you can ask it without fear of being shouted down or ignored.
Looking into key team members & partner brands
As mentioned, a crypto’s site should tell you who’s behind the asset, and also reference any brands that are partnering with the coin in the case that it has yet to launch.
You want people with a good track record, and brands that are well-known and legitimate. Also research to see if claims about these partnerships are genuine.
Scouring market data
Now that you know about an asset, it’s time to look at its position in the market. Checking things like market capitalization, trading volumes and the circulating supply of tokens will let you get a sense of how big and well supported it is.
You should also check the price changes that the token has undergone since launch. If it has spiked high and then dipped low in a short time frame, it’s probably worth avoiding. Coins with steady growth, or with slower rises and falls in value, are safer.
Determining utility
Last but not least, you want to see whether a cryptocurrency is actually useful. For example, does it support different projects on the blockchain, such as decentralized applications, NFTs and smart contracts?
Even with all this info to hand, investing in crypto is still risky, so proceed with caution to avoid getting stung.