How to Analyze & Evaluate Crypto Projects

Cryptocurrencies are becoming increasingly influential, and more people are investing in them. 

So, whether you’re new to the crypto phenomenon and curious about how to evaluate crypto projects, or an experienced investor looking for fresh insights into evaluating special situations in the crypto space, you’re in the right place.

This article will help you understand different criteria that will help inform your decision to choose cryptocurrency investments. 

By understanding the fundamentals of blockchain technology, you can make better decisions when selecting which crypto project is right for you. 

In this article, we’ll discuss strategies to help you assess a cryptocurrency project and its associated tokens so you can make informed investments in a sizzling market opportunity.

What’s a crypto project?

A crypto project is an initiative that aims to use blockchain technology to solve real-world problems. Crypto projects often involve creating digital coins that can be listed and traded on cryptocurrency exchanges. 

P.S. In some cases, Non-fungible token (NTF) collections or games created using blockchain technology could also be considered crypto projects. People can buy, trade, and sell digital assets stored on the blockchain. You can learn how to analyze NFT projects here.

These projects rely on decentralized networks, in contrast to more traditional networks, which are centrally managed. Using a decentralized network, crypto projects can ensure that all participants have access to secure and trustworthy information. 

Many crypto projects aim to make life easier by introducing innovative solutions to everyday problems, using secure and efficient technologies that anyone can access.

A step-by-step process for reviewing any crypto project

Researching a crypto project can be intimidating, with many criteria to consider. Here are the things you should research about any project:

Vision: Read the white paper

If you want to understand a crypto project, the best way is to read their white paper. It will give you a complete picture of the project. The white paper provides all the details about the following:

• the project’s goals
• who’s involved in it
• how the token works
• any planned upgrades and features
• why the token has value and could be worth investing in

Overall, the white paper lets you see the project’s state and plans to encourage and inform investors and enthusiasts to invest in it. 

Over the years, these white papers have become widespread and widely used. Recently, a study was conducted to take a deeper look into these papers – 1,258 crypto white papers were looked at carefully to determine if there were any repeating patterns.

Example: Bitcoin’s white paper provides everything you need to know about Bitcoin. 

Team: Check who the founders are 

A vital step in evaluating a crypto project is to look into the team behind it and see who founded it. To do this:

• Visit the project’s website or research them on social media.
• Consider the credentials of the founders, their past work experiences, and their level of expertise in this industry.
• Check whether they’ve been involved in scams.
• Consider whether they have valid connections with other people in the crypto space that are contributing positively to the growth of their project. 

Example: the people behind Ripple have decades of experience working in finance and on disruptive financial technology startups – this is essential for successful projects such as theirs. 

Advisors and investors: Who else supports the project

It’s essential to research any advisors and investors involved with the specific project. Experienced professionals in the field widely known for their reliable advice provide a sense of security when looking into such opportunities. 

They may also point out potential risks of the project so that you can make an informed decision. 

• When looking at advisors, look for developers, investors, cryptocurrency experts, and legal professionals.
• Make sure to evaluate how active they are in their support.
• Consider what kind of other projects they’ve been involved in.

Example: Pantera Capital is a top crypto fund in the US, and they’ve invested in many successful blockchain projects. Since 2013, the company has backed over 100 early-stage token deals and 90 blockchain companies.

Tokenomics: Review tokens use and distribution 

When looking at crypto projects to invest in, it’s essential to consider the token’s utility. In most cases, if the token has utility and is used, it will be worth something in the marketplace. 

Even if the token is valuable, you must determine how the market will react and whether people will use it. Some things to think about include the following:

• Is the token useful? 
• Can people quickly get this token? 
• What’s the deflation and inflation rate? 
• Was this part of an Initial Coin Offering (ICO)? 

If the token is only used to make payments, its value might go up and down with its popularity. But if it’s connected to a DApp or decentralized app, it’s more complex, and usually, the value will stay steady for longer. 

Most importantly, you don’t want to invest just because everyone else is investing. Do your due diligence before deciding to jump on board or not.

Example: Near Protocol (NEAR) is a crypto project with many uses, such as keeping the system secure and allowing you to buy and sell resources. It also has some special token utilities, such as fees for executing transactions and data storage.

Right now, there are over 700 projects on the NEAR blockchain. All these projects have attracted over 550,000 members, 4,000+ developers, 865 nodes, and 20 million wallets. Last year alone, they were able to do 250 million different transactions.

Roadmap: State and execution of the project 

To learn about the project’s roadmap and its state of execution, you can take several actionable steps:

• Read the project white paper for a comprehensive look at the team’s aims, expectations, and strategies. 
• Research any token sale or pre-sale details to ensure you’re prepared if you decide to invest. 
• Take some time to dig into blogs and forums to find out people’s reactions to the coin or token – but evaluate each post with a healthy dose of skepticism and fact-checking.
• Check out the project’s website; this will contain many hints about what kind of progress has been made on the project so far.

All these steps will help give you an overview of how well the project is working towards its goals.

Example: You can take a look at Bitcoin’s or Ethereum’s roadmaps.

Market: Use cases and potential to grow 

Use cases are simply ways that a crypto project can be used. For instance, some projects may focus on making payments easier or tracking company inventory. 

Then there’s potential to grow. This means looking at different things like the size of the project’s team, their experience in crypto development, and the strength of their community on social media or online forums.

To learn about the market and get a better understanding of its use cases and potential to grow:

• Start by researching the project itself. Read up on industry news to see how it’s doing in the market, and check out what other crypto investors are saying about it. 
• Don’t forget those analyst ratings – they’re valuable for predictions about its future performance. 
• Make sure the project provides detailed information about its business model or technology. It’ll tell you much about the project and help you decide if it’s worth investing in.

Example: if you are looking into Bitcoin, look at its current uses and future potential for growth as more people continue to adopt it as an alternative payment method and store of value.

Community: How active and involved other people are

Evaluating a crypto project involves taking a look at the community that is behind it. Ask:

• Are people talking about it? 
• Is there excitement and good sentiment? 
• Are there plenty of developers? 

These are all key factors to consider when considering how successful a coin might be. Additionally, watch out for signs of over scaling; too many fake accounts and posts can indicate an artificial pump-and-dump with the coin. 

Ultimately, however, the crypto market is driven by what people do: if they think it will succeed, they will buy it. The more people in the crypto space are actively trading the token, the higher likelihood its value may appreciate.

Example: in the cryptocurrency Cardano, there’s always a lot of discussion on Reddit from people with deep knowledge of the project, providing valuable insights. 

If you don’t see this activity level with your future crypto projects, waiting until more information can be gathered before investing may be best.

Metrics: Price, market cap, trading volumes, etc. 

When evaluating a crypto project, there are specific financial metrics to pay attention to. Market capitalization is how much the network’s value is worth – it gives an idea of the project’s potential. 

You can figure this out by multiplying the circulating supply with the current price. Trading volume is how much value has been traded in a certain amount of time, like daily or monthly. This will tell you if the token has enough liquidity for buyers and sellers. 

Liquidity shows how easy it is to buy and sell a particular coin. If it’s liquid, then you should be able to get your desired price when selling!

There are some simple things you can do to determine if the project is worth investing in or not:

• Make sure you check out the historical prices of the cryptocurrency. 
• Look at the project’s market cap and trading volumes – this should give you more insight into the project’s popularity among other investors. 
• Do your research on the project and read through any user reviews. 

Example: Look at Ethereum’s metrics here or read an in-depth review.

Activity: Look at the blockchain (on-chain) data

Evaluating a crypto project is no easy task, but looking at the blockchain (on-chain) data is one way to take a closer look. This data can be accessed with websites or APIs that provide information like on-chain analysis, data charts, and project reports:

• One valuable metric is transaction count, which shows how active a network is. 
• Looking at transaction value and how much is processed within a set period is helpful. 
• You should also see how many addresses are active at any given moment (the more active, the better) and the fees paid to determine the demand for block space. 
• The hash rate is a metric that measures the network health of proof-of-work cryptocurrencies. The higher the hash rate, the more difficult it is for someone to mount a 51% attack against the network.
• Staking can also be a helpful indicator, showing how many people are investing in the project.

Ultimately, these metrics will help you decide whether a crypto project is worth investing in.

For example: To evaluate the Solana project, use tools like TheBlock to examine its metrics.

Product: Test it out if available

If you want to evaluate and learn more about a crypto project, the best way is to test it out. To do this:

• Look around for any information about the project. 
• If available, download the project and take it for a spin. For example, if you want to test out a blockchain-based game, see if there’s a version you can download online or in an app store. 
• Once you have installed it, play around with it to better understand how it works. 

After taking some time to explore what the crypto project has to offer and how it works, you can make an educated decision about whether or not it suits your needs!

If you are a developer, you can look at the smart contract code and see if there are any vulnerabilities. Many projects get help from their community to fight the hackers, but unfortunately, sometimes attackers take advantage of flaws in the code and steal digital currencies, like in the infamous DAO hack.

Example: One of the most helpful frameworks you can use is Populus. It’s perfect for beginners since it makes testing contracts easy. With Populus, the Ethereum testing functionality is built into one set of features you can use to deploy a test contract; it’s based on py.test and is straightforward to set up.

How do I find a new crypto project?

Researching a new crypto project can be a tricky process. Luckily, some platforms can help make the process easier. These platforms include:

• Binance Launchpad
• OK Jumpstart
• Gate.io Startup

These are called initial exchange offerings (IEOs), which offer opportunities for you to invest in startup blockchain projects. You can buy tokens from the Initial Exchange Offering (IEO) platform, which is usually more secure than other token sales. 

There are also initial coin offerings (ICOs). ICOs fundraise for crypto projects, but they’re not always safe and secure since they’re hosted on a project’s website. But before making any investment, you still need to look into the project to ensure it’s right for you. 

Read up on the project and see what experts say about it. Doing this research ahead of time can help you decide if this is an excellent long-term investment.

Conclusion

So, you want to invest in a crypto project? Well, you must do your research first. This article outlined what you need to know before investing in a new crypto project and how to evaluate them. 

Remember, analysis and evaluation are critical – so don’t rush into anything! We hope this information helps you make smart and profitable investments in the future.