Does it Seem Legit? A Crypto Research Guide to Finding Your Favorite Shitcoin
Bitcoin is back at it again and the mainstream media has been in a frenzy talking about it. There’s no doubt that this media craze and retail FOMO is contributing to the parabolic rise in bitcoin prices as it charged past $20k last week. Just like in 2017, this has led to a lot of new people joining the crypto space, making their first ever purchases and discovering the hundreds of alt coins out there. As we all experienced, trying to wade through and find legitimate projects among the multitude of shitcoins can be a daunting experience especially when asking for help can result in people shilling whatever their stacks in, and others screeching “DYOR!”. The problem is learning how to do your own research while avoiding the scammers or getting sucked into a rug pull project that’s all hype and no substance.
In light of this, we decided to put together a simple list of topics and some related questions you should be looking into while researching a coin. After all, the point is to grow your money, not watch it disappear.
Who are the key people and what is their track record with projects they have they been involved with in the past? Do they have a clear vision? Even though the media still portrays bitcoin as “anonymous” and the mystery of Satoshi lends credence to that, these days many of the top names in the crypto space are well known and plenty of projects have public faces associated with them. Take Vitalik Buterin for example, the founder of Ethereum still extremely active in the development and often makes public comments. His cofounder, Gavin Wood went on to be the leading face of PolkaDot, and even in the DeFi space there’s Andre Cronje, creator of Yearn Finance.
Does the technology have a clear use? A common critique of crypto and blockchain in general is that it’s a solution in search of a problem. While bitcoin has adopted the “digital gold” narrative and Ethereum is basically a decentralized operating system, many cryptocurrencies seem vague and unconvincing, leaving people often wondering why a new coin or token is even needed.
Does it have competitors and if so, how does it compare to them? Plenty of protocols have been touted as “Ethereum killers” and yet Ethereum remains the leader in the smart contract space.
Is it being actively developed? The fastest tech in the world means nothing if no one is building on it. While Ethereum may be considered “older” tech by those who like Cardano, Polkadot, or Avalanche, the developer ecosystem on Ethereum is far larger, helping it remain the leader in smart contracts.
What the competition and what’s the ease of entry for a crypto solution vs traditional uses? Back to the “solution in search of a problem” criticism, adoption of any particular crypto will only come if it brings significant improvements to a problem. For example it’s clear that cryptocurrency can improve payments tech(xrp, nano), allow people to participate in decentralized finance (eth), or store value outside their countries fiat (btc) in ways that are unique to blockchain. If the current, traditional system isn’t in need of improvement, crypto doesn’t need to budge it’s way in. Even within crypto a lot of projects are vying against each other to be THE solution and we have yet to see whether a single chain will win out, or if several will survive and work together in a network.
What are the supply and buy side economics? — how do new coins get minted, if at all? Some coins like bitcoin have a fixed supply and are mined in a predetermined, predictable manner while other coins are inflationary and issue new coins on a predictable schedule based on blocks being mined or staked. Neither of these methods are particularly “good” or “bad” but each have their pros and cons and this is something you definitely want to be aware of.
Are many coins centrally controlled? Decentralization is at the heart of the crypto movement, so many in the space see projects that have centralized aspects or a set of prominent whales and the “scam” concerns start to grow. For example, some see XRP as a way for the founders of Ripple to continuously fundraise for their private company by constantly selling XRP, and some chains’ exploration into Delegated Proof of Stake saw cartel-like behavior among the top nodes to centralize power.
Has it demonstrated strong growth recently? Where is the growth coming from? How else does the token provide utility/value? Other than being a speculative vehicle, the token should have some sort of use case that incentivizes people to hold it. Is it key to the network?
Does it have governance uses or just used to pay miners? Many people holding DeFi tokens like COMP, AAVE, and YFI believe in the potential of these projects and think they’ll gain wider adoption so holding the token gives them a say in the direction of the protocol.
Is there sufficient activity? What do the charts look like? If single high value purchases are impacting the price significantly and the spread across exchanges is wide, it’s obvious that no one is really trading the coin.
How volatile is the price of the coin? A lack of sufficient liquidity leads to volatility in the price which will ultimately keep people away if a few big holders can manipulate the price for their own interests.
Are people talking about the project? While much less important than the above factors, you should take in to account the hype around the project. Marketing works, otherwise corporations wouldn’t spend millions to get their product name blaring from TVs around the world. Take note of how much excitement the project is producing and whether are people talking about it. It shouldn’t be a shocker that a project is much more likely to be successful if people have actually heard of, and are excited about it.
There you have it. Now, we’re not saying you have to answer all of these questions like a checklist when researching or buying new coins, or even that they’re important for every coin. Hell, we’re just as prone to fomo’ing into some shitcoin just like anyone else. Just remember to never invest money you can’t afford to lose and be aware of what you’re buying. While buying into the top cryptocurrencies for the first time is exciting for newcomers, many quickly move on to searching for “the next bitcoin” which could bring them the multi thousand x returns everyone dreams of. Remember to keep your wits about you, follow our research guide, and maybe, just maybe, you’ll strike digital gold and you’ll be driving that lambo soon.
Thanks for reading.
JefeDix @ https://seems-legit.com