How to Research a Cryptocurrency Before Investing in a Coin


It has been over a decade since the mysterious Satoshi Nakamoto created Bitcoin, the first and by far most popular form of cryptocurrency in the world. Despite its fame, Bitcoin isn't the final word on cryptocurrency – imitators, innovators, and spinoffs have emerged in huge numbers, and there are more than 8,000 cryptocurrencies on the market today. With such a broad range of cryptocurrencies to choose from, how do investors know which the best cryptocurrency to invest in is?


Here are 5 factors that you should consider when making a decision to buy cryptocurrency:


1. Whitepaper


Every cryptocurrency project should have one, and it should be easily accessible.

https://coinmarketcap.com/ usually has the whitepapers of most crypto easily available.




Read the white paper carefully; it should tell you everything about what the developers of the project intend in their work, including a timeframe, a general overview of the project, and specifics.


The white paper is a development team's chance to lay out the who, what, when, and why of their project. If something in the white paper feels incomplete or misleading, that might speak to fundamental issues with the project itself.


2. Coinmarketcap


This is the total value of all the coins that have been mined by a particular company. As an investor, you need to understand the value of what you are buying. Some coins have high value while others are new entrants in the market.

Coins with a larger market cap are usually priced much less expensively. Aside from the value of their Blockchain technology, scarcity tends to be a driving factor in a cryptocurrency’s value


3. Price


One element to keep in mind when scanning for the next superstar is the price of the tokens. Bear in mind that volatility is going to happen in cryptocurrency. Understand what can influence the price to go up and down examples: China banning bitcoin, a tweet from Elon, a whale (large holder) selling off their crypto.


For Instance, earlier this week, May 19th, 2021, an announcement by china’s government to curb cryptocurrency dropped the price of Bitcoin from 40,000 USD to 32,000 USD.

In the past, we have seen a tweet by Elon Musk skyrocket Bitcoin price when he announced that Tesla would start accepting BTC as a mode of payment and vice-versa.




Once a specific coin is being researched choosing a price with a Limit order for and a price to sell using a limit order can decrease risk. Understanding seasonal trends ex: During the summertime, bitcoin historically goes down.


4. Supply


Most cryptocurrencies have a pre-determined maximum supply. When that maximum is reached, typically through mining efforts, no new tokens will be produced

Let's take the example of BTC.


Bitcoin has maximum mining of 21 million coins. Currently, only 18.5 Million have been mined so far. This leaves less than three million that have yet to be introduced into circulation.

The big question is what will happen after all the 21 M BTC have been mined?


5. Road map and accomplishments


What is this coin solving for? Bitcoin was created to disrupt the economy as another payment alternative. There are over 8,000 cryptocurrencies and they all have a purpose and are trying to accomplish their own goals. Is this coin trying to disrupt an industry? Do you believe and share the same beliefs? What is the utility of the cryptocurrency? Has the crypto accomplished any of their goals that match their roadmap on time? Have they partnered with any corporations?


6. Social Media


As an investor in cryptocurrency, Social media is one thing you can’t ignore.

Caption this:

The Tesla chief executive’s often-cryptic messages have sent bitcoin’s price on a roller-coaster ride this year. Prices soared nearly 20% one January morning when he added “#bitcoin” to his Twitter biography. They jumped 16% in a single day the following month after Tesla Inc. revealed it bought $1.5 billion worth of the cryptocurrency.

Then, he tweeted earlier this month that Tesla would no longer accept bitcoin as payment for its vehicles. Investors widely blame the tweet for starting bitcoin’s most punishing selloff of the year, a rout that has shaved hundreds of billions of dollars off its market capitalization and has erased gains made since late January. After peaking in mid-April near $65,000, bitcoin prices have fallen some 50%, including roughly 40% since Mr. Musk’s May tweet.


7. Indicators


People often use indicators like Know Sure Thing and the Gaussian Channel (used in a 5-day view) when deciding whether to buy or sell.


Most cryptocurrencies have a Twitter or telegram. Depending on your long term or short term strategy seeing the chatter, excitement, or frustrations of other investors can give you some insights


Before investing do your research and make an informed decision with these best practices.



Next Steps:

  • Check out our Crypto Couch playlist to hear from experts in the cryptocurrency space!


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