Here are ten informational indicators that can help you decide whether a project is worth investing in or should be avoided at all costs.
When venturing into the world of cryptocurrencies, which can be an intimidating place to do so, figuring out how to differentiate between a good project and a poor project can be the difference between a bumpy ride and an enjoyable journey. Due to the inherent risk of capital.
Here are 10 data points that might help you decide whether a project is one that could be worth investing in or one that you should absolutely avoid.
Utility – The Defining Characteristic
A cryptocurrency project’s utility may determine whether it succeeds or fails over the course of its existence. The rationale for this is that value-added longevity is an important factor in assessing a cryptocurrency’s likelihood of surviving; after all, what is the point of having a cryptocurrency if there is no value to be had?
Without an objective and value, demand may decline and, eventually, the project may no longer be viable, especially in challenging economic times or during a bear market.
Top Token Holder Percentage: Data Is Your Ally
Now, this may seem like a strange choice, am I right? Based on the ratio of token holdings to top holders, this aspect of the equation, however, starts to take on a greater significance.
So let’s say you identify a project where the top 100 holders own 80% of the tokens. The possibility in that situation is that the majority is team distributed or that a few whales control the majority and can easily manipulate the movement of prices.
Keeping an eye on a project is undoubtedly important. Basically, marketing is necessary for every expansion, including those involving investments, boosting participation, or developing a community or product. Keeping up with or tracking all the announcements from a developing project can frequently be a pain. You can stay informed about announcements and project updates by using data aggregators.
Token Distribution: Study The Figures.
Valid token distribution is essential if a project wants to win over prospective investors. A lack of decentralization, conflicts of interest, and a lack of liquidity can result from inefficient token distribution, which can also cause token concentration. These problems may seriously damage the project’s reputation, prevent acceptance and growth, and possibly even result in manipulation of the token’s value.
Tokenomics: That’s Where You Must Concentrate.
The list includes supply, demand, distribution, longevity, and more. The department of a project called tokenomics can include all of these and more. The tokenomics can also be a major factor in determining if a project is good or bad because numbers matter and if they do not look good over the long run, a project’s chances of survival are at risk.
Community Is Crucial.
The stability, engagement, and trust that projects so desperately require could potentially be provided by a strong community, which can be of immense value to practically any project.
Communities that are weak or nonexistent typically show a lack of trust or interest, which can be a bad sign for an investment. High levels of common interest and growth can boost satisfaction and passion within a project, perhaps extending its life and adding value.
Who Is In The Project Team?
With a team, everything tends to be stronger, and crypto projects are no exception. The likelihood of success can be estimated by the team. The fusion of skill and experience can increase a project’s chances of success while also generating a sense of belonging and trust.
Roadmap: For Individuals Who Like To Follow Along
Consider the importance of having a reliable map if you get lost while travelling; now imagine that the map failed to deliver on its promises and some sections were missing. It would lead to issues, particularly with trust.
This is relevant to the roadmap for cryptocurrency projects. If deadlines or pledges are not kept, it not only affects the investor but also harms expansion and trust. Determining if a crypto project is worthy of investment or not requires spotting whether a roadmap has been followed and if goals have been achieved.
Addresses Which Are Currently Active
A cryptocurrency project’s active address count can reveal important details. The number of active addresses on a certain blockchain network indicates the number of distinct addresses that have sent or received transactions over that network within a given time period. The user-based engagement is stronger when there are more active addresses.
Low numbers of active addresses can be a sign of a lack of interest or lack of trust, or they can show that there is an issue with the project as a whole. When evaluating if a project is good or not so good at the moment, this is a credible area to take into account.
Those Good Old Exchange Listings
Exchange listings place cryptocurrencies in the public view and make them accessible, which is how cryptocurrencies acquire popularity. A coin is more likely to flourish the more exchanges it is listed on for a wide range of reasons, including accessibility, stability, growth, interaction, and many more. When looking for indicators of whether a project is good or poor, many exchange listings and their tier might give a stronger indicator because the bigger the exchanges, the better.
These are merely 10 data points that we believe could aid in understanding through the many decision-making processes and choosing which projects you value the most to deploy capital within. In general, there are many aspects to take into consideration when evaluating whether a project is excellent or poor.
We haven’t thought about the project itself, the unique utilities created by tokenomics and enforced by smart contracts, or the financial incentives put in place to draw in new holders while focusing on what distinguishes a good project from a bad one.
This information is not intended to be tax, financial, or investment advice. For guidance on your particular circumstance, you should speak with a qualified expert.. For guidance on specific needs, you must consult with a qualified expert.