We have heard the disclaimer “Crypto products and non-fungible tokens are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” and it haunts us pretty much all the time. Another term that we keep hearing is ‘DYOR’ which stands for Do Your Own Research.
Following are 7 areas one must look at before investing in any crypto project.
1. The Model of the Project
A successful business model represents a map of how it is going to create value for a mass group or a focus group of people or for the industry as a whole. Having a sound, value-creating, and revenue-generating business model ensures stability, sustainability, and growth led by innovation. Every business model is created with a) an objective to solve (more) problems; b) a vision beyond the immediate concept where the project has established a system in its network in which the problem has ceased to exist or curbed at maximum.
2. The Mechanics of the Project
Decentralization has been the core goal of the blockchain industry to analyze a project’s effectiveness in maintaining immutability, transparency, automation, and resilience with its decentralized business model. The mechanics help evaluate the proficiency of the project’s business model in the highly competitive crypto space and the numbers a project will be able to achieve if it successfully reaches every milestone of its roadmap.
3. The Management of the Project
A well-experienced team leads the project with coherence in their strategies and collective progress toward the project’s vision. A balanced combination of hard and soft skills, the ability to overcome technical difficulties and entrepreneurial challenges, the team of advisors and partners, clear articulation of thoughts from management to the customers, timely accomplishments of the milestones, and the ability to cope up with adverse situations are some of the factors which are chiefly considered in this framework.
4. The Market Scope for the Project
Market research includes in-depth evaluations and SWOT analysis of these projects. Understanding and defining the project’s key offerings. It is important to study the size of its existing market, competitors’ activities, unique selling points (USPs) and challenges, and the product’s ability to acquire a market share.
5. The Motivation Behind the Project
Every project is using blockchain, building a network, and circulating a token within its network. The demand and supply of the token decide the price of the token, and this same demand and supply are decided by the utilities the token has within the network. Our team seeks an understanding of the application of blockchain, use cases, tokenomics, and the value generation spots of their tokens.
6. The Momentum of the Project
It is pivotal to identify the traction the project has received on social media over a period of time and the reputation a project has developed from its inception. Track the perception with which a project is perceived and study the company’s roadmap, its expansion in multiple directions, the network effects, partnerships established with high-profile organizations, and expansion of the existing customer base with active acquisition and growth strategies.
7. Money Invested in a Project
The supporters and investors/ partners of the project make all the difference. Check for all funding rounds, token lock-up plans, and the income that the crypto project has been able to generate. The statistics of a crypto project is publicly available and can be taken into consideration as it emanates a sense of transparency across all spheres. For example, if a crypto project showcases the number of wallets that have the native token of the project.
Summing Up
You don’t have to be a rocket scientist to get started with investing. Sure, crypto may seem overwhelming in the beginning but as you dive deeper into the ecosystem and understand how the market works, why a certain dApp or ICO is becoming popular and so on.
But, it is crucial to remember that the cryptocurrency market is still in its infancy and needs a lot of attention and discipline as well. Besides ideally do not put more than 6-7% of your total capital into crypto.
