(Photo by Jefferson Santos on Unsplash)
There have been several scams in the market that have made people question the authenticity of many projects, and rightfully so. The onus of proving their authenticity to the masses lies with these projects themselves. Like any new technology in the market, crypto too has to prove its worth to the people before they accept it completely. But the fact remains that we have to responsible for our own investments and no matter how genuine a crypto investment looks at a first glance, the risk of it being a scam is ever present these days.
Trust is a beautiful thing, but before giving it to someone/something one must sweat a little. In our case it means that before investing we need to do some in-depth research about the crypto project we want to invest in.
This question got me thinking about the way that I sort my cryptos out before the initial investment. I feel that if the project/blockchain/coin is subjected to the same rigorous questioning during your research, then it might reveal a few answers about its legitimacy. Before you invest your time researching and reading their white paper, you obviously would first and foremost want to know if it is even a genuine project. Here are few points to keep in mind during your research:
- Why does the coin exist? Or why would somebody offer me this opportunity to make money?
Call it their aim, goal or whatever their official statement is. Read it on their website or checkout their videos. The important thing to keep in mind is - 'what's in it for them?' Their reasons could range from being entirely capitalistic to charitable but make sure that you read and try to understand if these reasons are genuine.
- Development Team
The people on the team and obviously their qualification is a must know for a serious investor. You may also want to look into their previous achievements and experience. Size of the team also matters. Look at the numbers – too small a team for too big a project is going to struggle to deliver, no matter the greatness of the idea behind them.
You guys probably know more about this than me. What I usually do is to check their website, Twitter and Reddit pages. How many followers do they have? Would the community hold when fudding begins? Are they radical enough to stand their ground against some crazy whale action?
You can get a basic idea about it when you start to read their tweets, social media comments, posts, etc. and I am not talking just about the recent stuff. Scroll down like crazy and go to their genesis point and read older comments and posts as well.
- Recent community participation
I mention this separately because a lot of newer coins with smaller communities are much more active in marketing then the older and established coins.
My outlook is – Older and secure is for storage & newer and energetic for growth.
Check out how much noise they make? How much tweeting/redditing are they doing? Do they have a lot of trolls – trolls might not be good for short term, but they have a certain energetic effect on the prices (I am hoping for the positive and preparing for the worst….)
- Graphs and Projections
Meh! Don’t want to go into it (I am not the best guy for this either). Please do keep in mind that technical analysis (TA) is the backbone of any sound investment strategy. This is necessary if you are serious about investing any serious amount of money.
Spend a few hours behind the screen, sweating every small detail. The truth is that there might not be a sure shot way to tell a scam from a genuine crypto/project until the D day arrives. So, the only thing you can do is your due diligence. Not all scams look obvious. If some promises to send you 5 dollars if you send them 1 dollar then you know that it is a scam, but life is not always that simple. Good scams are more intricate than this and require a lot of homework on your part before you can smell them out.
PS: I have never invested in any ICO. I will also add that there are several coins that I think to be scams and they are currently doing a lot better than some genuine ones. I think that these coins would fail in the long run, like most weak projects do.