How do you decide whether a cryptocurrency or token is worth purchasing or investing in?
Where do you start? What’s important and what’s not?
This post details the initial questions which I ask myself about a cryptocurrency before independently deciding whether to conduct more in-depth research. This isn’t extensive or complicated but is something that I’ve used as a starting point to evaluate projects.
Remember: I’m not a financial advisor. Read my full disclaimer here.
- My default investment decision is always to decline or pass. 9 out of every 10 startups fail, and this is probably an optimistic estimate.
- I write everything down, as it helps me process information.
- This isn’t perfect, but anything is better than nothing. As you evaluate more projects, you’ll find that the list of questions you ask becomes more refined.
- You’ll find some links to some interesting/valuable YouTube videos at the end of the post.
Questions to Ask
- What’s your initial impression? Why?
- What utility does this have?
- What’s the purpose of this?
- Does it serve a real problem?
- Would the product/service function without the coin/token? If so, what’s the point?
- Are people already using the coin/token? Who are these people?
- What is the USP?
- What market do (or will they) operate in? Is this market worthwhile?
- Who are their competitors inside and outside of the crypto-space?
- Is there a clear roadmap? Are deadlines being met?
- Are the development team active?
- Who are the team?
- How many people are on the team? Is this realistic (given ambitions)?
- Do they have the competencies required to complete the project?
- Are any members of team well-known?
- Are they dependable and trustworthy? Is there anything to suggest otherwise?
- Do the team provide regular updates?
- Does it have a strong community?
- What is the general consensus on BitcoinTalk, Reddit, Twitter, etc.? Why?
- Can I find any information from other sources? Summarise the chatter.
- Explain the principle of this to someone else.
- Briefly summarise your impression of this.
- Make an initial judgement on investment. What would have to change in order to reverse that decision?
The Future of Initial Coin Offerings
In this video, Chris Dunn covers:
- Key questions to ask yourself before investing in an ICO.
- Red flags which help you identify (possible) ICO scams.
- Advice on how to investment strategy.
- The future of ICOs and his predictions.
Long-term Investment Advice
After 31:30, Carter Thomas (i.e., Coin Mastery) summarises some solid long-term investment advice from the Tim Ferriss Podcast (#270):
- Don’t treat investments like lottery tickets (i.e., don’t spray and pray).
- Select your long-term investments carefully and concentrate your funds in the currencies or tokens you truly believe in.
Trading Tip #14: The Dangers of Overtrading
In this, DataDash notes that:
- 95% or more of day traders lose money (compared to holding).
- Overtrading hurts your profits as the fees charged by exchanges add up to more significant amounts as you trade more.
- Stay ahead of the market:
- Do your research and perform some basic technical analysis.
- Plan your purchases and sales in advance.
- You are the judge of your own trades – hold yourself to a higher standard.
More (relevant) valuable advice in Trading Tip #11 and Trading Tip #12.
How to be Prepared for Cryptocurrency Bubble Burst
Although not 100% relevant, this video by CryptoPortfolio summarises how you could prepare your portfolio to survive market crashes.
- Hard to predict when a crash will occur. Should prepare in advance.
- Invest in cryptocurrencies and tokens which have solid fundamentals.
- Don’t throw too much money at ICOs.
Anything to Add?
Thanks for checking out this list of cryptocurrency investment questions.
Have something to add?
Let me know in the comments below!