The Basics of Crypto Research - Spotting A Winner [A Worked Example]

Crypto is a harsh battleground; research is an investors only weapon. It allows your average investor to separate the boy-cryptos from the men-cryptos. In a free market environment only those that truly deserve to be at the top ever reach those lofty heights. Many alt-coins are pumping high, and it’s easy to see why. People look at the price of Bitcoin and Ethereum and think they’ve missed out, consequently, the multitudes of alts are scoured for any signs of similar potential. Most don’t know how to spot a coin with potential, which is why you see many investors FOMO into a coin as the prices are pumped, only to be burned when the whales inevitably dump. 

However, at the end of the day, if a coin is a solid investment, a pump’n’dump doesn’t change this. The fundamentals of a coin do not change, if a coin was a solid investment originally it will remain a good investment. My next few articles are going to be a worked example of how to carry out basic research on a coin in order to ascertain two things; whether it’s a good investment, and what sort of investment it is. This article will cover the first few steps of good research practice. 

So let's get ready...

My first port of call for researching any crypto is always coinmarketcap.com. It’s a great website which has all the pricing data you need to ensure you’re making informed decisions when choosing your crypto. From this site you can analyse data for price, market cap, circulating supply, trade volume and more; and you can look at both short-term or long-term trends in this information. Ultimately, if you’re a hardcore crypto investor, this website needs to be in your bookmarks. It may be a little too much to set it as your homepage, but you get the idea! 

So let’s do a quick worked example of researching a coin. I’m going to choose Ripto Bux as this is one which I hold in my portfolio and has been very profitable for me over the last few months. So at the time of writing RBX was ranked at 302 in cryptocurrencies; it’s priced at $0.003145 with a market cap of $1,136,012. So the first thing I always do it to open up the financial chart.  

Here I’m really looking for anything that looks suspicious; in other words, is it a pump’n’dump coin. Almost all coins will have huge spikes at some point along the graph because ultimately whales are the types that will do this regardless of the coin. If there’s an excessive amount of peaks and troughs that don’t look like they make sense, they probably don’t. you may want to stay away. For me, if I can look at a graph and think a number of times “wow, if I’d have sold there, and rebought here, and again there, I’d be loaded” this is a huge warning sign. Retrospectively, any monkey can look at a graph and spot these trends, try doing it in the moment and you will get burnt. Predicting whale actions is nigh-impossible. 

You’ll end up looking more like Nostradanus than Nostradamus!

 

If after looking at the graph you’re still interested, the click on the social tab. At this point you should be picking up a pen and paper (or whatever your chosen medium of note-taking is). Researching can be an information-heavy process, sometimes without a clear outcome. You may get to the very last step of the process before deciding not too invest. The notes you keep through the following steps will be crucial in making an informed decision. Additionally, I’m a huge advocate of portfolio management, you should be constantly monitoring your portfolio, deciding which coins to keep and which to remove. Your notes will become crucial in a few months when you’re deciding whether a coin that hasn’t lead to a profit yet is worth keeping. 

Anyway back to the social tab. Social media is way that projects communicate with their investors. It let’s you see not only what they are up to, but also how seriously they take the project, and most importantly, how seriously they take your money, time, and support. 

Here you want to be asking questions along the lines of; how active are they? How many platforms are they active on? Do they discuss the price of the project or the development of the project? 

This tab doesn’t cover all social media platforms, and various stages of development in the process require a stronger or weaker focus on social media. You don’t want the lead developers to be on Twitter all day when the project would benefit from them writing code. However, complete silence from a developer team doesn’t necessarily mean they are focusing on writing the code; take this with a grain of salt! Posts about the development of the project is good, a green flag, this suggests they take it seriously and are working hard to meet the deliverables outlined on the roadmap. 

Ripto Bux are very quiet on Reddit, but reasonably active on Twitter. For some, this may be a sign to stop researching; personally, I was on the lookout for a project I could put a small amount in as a long-term investment. So for me this was a sign to carry on the research, but already I’m seeing RBX as the type of investment I won’t be putting a large % of my portfolio into.

Next step involves leaving coinmarketcap.com! The profile should have a link to the official website, make sure you click this to ensure you aren’t stumbling onto a scam site. Once you’re on the official site there’s two things you’re looking for; the whitepaper and the roadmap. I’ll admit I don’t read the whitepaper for every coin I’m invested in. Truly understanding a whitepaper involves a lot of time and effort, realistically if I’m putting less than a few % of my portfolio into the coin I’m not going to spend all afternoon reading a technical document. Definitely read the abstract, skim read it, get a brief understanding of what the project is aiming to achieve. For example, I hold over 30% of my portfolio in Ethereum, so I’ve read and fully understood the whitepaper, I have less than 1% in RBX, so I’ve skimmed it. Keep your expectations realistic, researching crypto is rabbit hole you could lose months down! 

The roadmap is usually a lot easier to understand. It basically outlines what the project is expecting to achieve over the following months/years. A fully packed roadmap can be both a positive and negative. On the one hand it shows they are expecting to be working full throttle in improving the coin; on the other it could reveal unrealistic expectations. However, unless the items on the roadmap are huge, convoluted processes (such as moving from Proof of Work to Proof of Stake) an empty roadmap is almost always a bad sign! 

I couldn’t find a roadmap for RBX, definitely a red flag. This isn’t necessarily a ‘steer clear’ flag, but if you’ve been hesitant up until this point this may be enough to tip you over the edge, For me it isn’t, so I’ll carry on. Again, you should really be keeping the amount of money (or % of total portfolio) that you’re looking to invest in this project at the forefront of your mind during the research process. We are yet to complete the research process for RBX and already there is enough warning signs to scare me off investing large amounts in this project. Certainly, if I was looking for an investment to make up a large portion of my portfolio I’d be looking elsewhere. As it stands, a small investment in RBX still seems relatively attractive to me.`

I think we will pause here, it's a lot of information to convey and as I mentioned earlier I'm going to be spreading it over a view articles to ensure that I can give each point the devotion it deserves. The next section will be coming out very soon, I'm planning to get it out the door by tomorrow, so keep your eyes peeled for that. The best way to do this? Click through to my profile and follow me, then it will pop up on your feed as soon as it's released!

Just to summarise today's article [my attempt at a TL; DR]:

• Research is the key to success in investing in crypto. If you don't know your stuff about the coins you've got money on you're not investing, that my friend, is called gambling. You may still get lucky and win, but you increase your chances if you know what you're investing in!
• For the love of God use coinmarketcap.com!
• Avoid coins that are traditionally pump'n'dump coins. Now this is difficult to do as a large number are successfully pumped because they are valid investments; PIVX springs to mind as an example of a very good investment with a history of huge pump'n'dumps!
• Keep notes, but keep succinct notes. Don't write down everything you come across, but definitely keep notes of both the green flags and the red flags!
• Spend some time on the social media platforms that the project uses. Don't just read the posts, but read between the lines of the post. If they are talking about price, why aren't they talking about the development?
• At least skim the whitepaper. As I said fully reading every whitepaper is completely unreasonable. If you decide to invest you can always go back and read it in detail later. For now just make sure you have a general understanding of the aims of the project and why the items on the roadmap will help achieve these.

Remember to click through and follow to ensure you don't miss the follow-up sections of the basics of crypto research!

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This is part of a super regular segment I'll be doing, to make sure you don't miss out click through to my profile and follow me! Let me know in the comments below if you do, I'd appreciate it! Also, got any comments, questions or suggestions fire those at me too!

Disclaimer: For legal reasons, this is not intended as advice, I'm happy playing with fire with my own money, I do not by any means suggest you do the same moves I do. I will, however, be posting them, and the reasons here, and if you choose to follow me, then sweet!