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Ask CryptoVantage: What Are the Best Ways to Research a Cryptocurrency?

Investing in crypto, like investing in anything, shouldn’t be done without doing research first. However, unlike most traditional investment options, crypto isn’t the easiest thing to research, especially for beginners.

There simply aren’t many investment articles reviewing crypto assets from reliable sources like there are for stocks and larger companies. Instead, most users have to figure out whether they want to invest in a digital asset by diving deep into the technical and sometimes sensational information they can find on a cryptocurrency.

While it is likely best to avoid sensationalist information (articles designed to “pump”), technical information, along with a few other places, are good places to look. In this edition of Ask CV, we’ll cover the best ways to research a coin.

What are the best ways to research cryptocurrency coins or tokens?

Read the Litepaper or Whitepaper

Though it can be somewhat dense to read, a project’s whitepaper is often the best place for you to research a crypto asset. The whitepaper will include all the important information about a project, including its goals, technical information, and how the tokenomics will or do work. If a project has no whitepaper, that is already a bad sign. If the project only has a litepaper, or yellow paper, that can also be a bad sign of future development. This is because without a whitepaper, there isn’t much direction for the project for you to assess, and litepapers don’t have a lot of information.

The best projects will have a whitepaper and a litepaper available for you to read, and you should do just that. By reading the whitepaper you will have a better understanding of the project, and also be able to assess the care with which it is being developed. This is because the more time and effort has been taken into explaining their idea, the better odds that it will be fleshed out over time.

It should go without saying that simply having a white paper doesn’t mean a coin will have success either. Plenty of scam coins have had comprehensive white papers over the years. Instead use the white paper as a starting point for learning about a coin.

Use Crypto Screeners

Crypto screeners are sites like CoinMarketCap and CoinGecko. These sites have information on a coin such as its distribution, total supply, circulating supply, price history, general information on the project, and more. Using crypto screeners will help you to look into the history of an asset to help determine whether it is a good time to buy, along with providing you with links to articles about the asset, and the official website of the project.

It is likely best to avoid the comment section on any of these sites, as they are filled with people both trying to pump an asset and create FUD (fear, uncertainty, and doubt). Instead, simply use crypto screeners as references to your larger research using the project’s whitepaper.

Use Block Explorers

Block explorers are an underrated way to research a crypto coin or token. They are most useful for tokens within a coin’s ecosystem, such as Ethereum tokens like SHIB, or Binance Smart Chain tokens like CAKE. By using a block explorer you can truly see an asset’s distribution on the blockchain, meaning who holds it and how much of it they hold. It can be useful for determining whether an asset is subject to manipulation due to their being a large portion held within a few wallets. You will be able to tell if the large holder is a true whale or an exchange based upon the identity attached to the address, as most exchanges have labelled their address such as “Binance Hot Wallet”.

If you can see that an asset is mostly held by a whale that isn’t an exchange, then you may be best to avoid it as it could easily be manipulated by that holder.

Closing Thoughts: Information is Power

You should always do due diligence before investing in anything, whether traditional investments like stocks, or alternative investments like crypto.

We’d be remiss if we didn’t mention CryptoVantage’s own extensive coin guide section that should give you some basic information about the most popular cryptocurrencies.

A cryptocurrency’s whitepaper is by far the best place to start your research, as it should hold all the important information you need including how the asset will create demand for itself (tokenomics). Adding some referential information to your research through crypto screeners and block explorers will only further help you make your decision.

Just remember, only invest what you are willing to lose!

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About the Author

Evan Jones

Evan Jones was introduced to cryptocurrency by fellow CryptoVantage contributor Keegan Francis in 2017 and was immediately intrigued by the use cases of many Ethereum-based cryptos. He bought his first hardware wallet shortly thereafter. He has a keen and vested interest in cryptos involving decentralized backend exchanges, payment processing, and power-sharing.

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