Many times in crypto space you hear the phrase Do Your Own Research or #DYOR. Pretty much everyone says it. After all, it’s one of the most important cornerstones of a happy HODLer. But, how does one approach this? What are some things to look at and what are some steps to take and how can you find a good long-term investment? Let me show you how I do it!
WARNING! I’m going to be using coins I invested in as an example. I am not telling you to invest in them. This article serves for educational purposes only. This is not financial advice. I believe that using an example is the fastest way to teach.
- Why should you DYOR?
- How do I start my own research?
Why should you DYOR?
Doing your own research is one of the best risk management strategies you can apply. Yes, it is true that no amount of research can save you from a company being hacked, minting and selling their tokens or just straight up abandoning the project (also called pulling the rug on you), but it massively lowers the chances of this happening. After all, this is still unregulated crypto, so bear that in mind.
DYOR helps to find these early signs and not falling victim to FOMO or just a random person’s hype on Twitter (including me). After all, once you are neck-deep in crypto, you start to feel like you want to invest in every coin you see mentioned. Doing your own research will help you to spend your money in a more rational way. Although, emotions will always be hard to control.
If you manage to find a project with great potential with all the things we’ll discuss further, you might invest in it before it gets advertised by bigger influencers. At this point, if you hold onto your investment long enough, you are pretty much guaranteed a profit (unless the project dies, of course).
No matter how much of your own research you do, don’t forget to hold onto your good trading habits.
How do I start my own research?
With thousands upon thousands of cryptocurrencies and tokens available on the market, it is easy to get lost in it all. You could spend days on research and still get only through a small portion of the market. If you have that time, then I strongly recommend doing so, for the reasons discused above. Otherwise, you can scan through tweets of influencers asking people to shill their altcoins to them or just follow their calls. Doing this will reduce the number of coins you need to go through.
Step 1: Pick ICOs or small market cap projects
Using CoinMarketCap website, you can filter for coins you are interested in using their filter system.
You can also look into upcoming projects and be as early as humanly possible. For these projects (also called ICOs, Initial Coin Offerings), you can go to the coin calendar and see, if it’s possible to enter one of many projects listed there.
Since the way of entering these projects varies greatly, I’ll be focusing on looking through the already existing crypto projects. But basically, you can go through the projects and their websites and if you like the idea, you can find here all the additional details.
Existing small market cap projects
Picking a small market cap project is much easier. You can find projects that just came out or that are about to skyrocket. What I do, when looking for these hidden gems, is to go into the cryptocurrency tab and use its filter.
Now, a bar will appear on top of the list of coins. Here, you’ll see stuff like industry, platform etc. I sometimes click Platform and select Binance Smart Chain for low-fee investments, but not always. What I do every time though, is to click the “+ Add Filter” button and in the list of things that appear, click “Market Cap”. This widow will show up.
It’s time to set our desired market cap. I usually do 0 – 10 million dollars, but this can differ. I know a lot of people search by 0 – 30 million. If I don’t like what I find in the 0 – 10 range, I just repeat the process and increase the range by another 10M. Once you click Apply Filter and Show Results, you should see that the list of cryptocurrencies drastically reduced in size. That’s the first step done.
Step 2: Quickly discard projects
At this point, I usually go through the coins one by one. This sounds like a lot of time, but most of the projects can be thrown away at the first glance. Before even opening a coin, you can eliminate it on the basis of a few things.
Extremely low volume can show the project is dead.
The graph on the right can show you the project is a stable coin (minimal changes around a set value – usually around $1) or that it’s already skyrocketing and thus not worth looking into for the purpose of big growth.
And one last thing you can use to quickly ignore a project is its name. Something with a meme name like pulltherug.finance feels like it’s just destined to be a scam, even if the creators might’ve not meant it this way.
No one wants to invest in a project that then pulls the rug on its investors and be laughed at with the words “It was obvious it would happen, have you not looked at the name?” The fact of the matter is, marketing is a massive part of any project. If it fails in something as simple as the name, it will have a tough time rising later.
Remember, I am looking for good investments, not meme coins.
Step 3: Make a list
At this point, you know what projects to ignore at a first glance (if you want to be thorough, you can still go through all of them, but this is how I do it). It is time to make a list. I usually click on each coin in a new tab (open it with a middle-mouse button) and gather around 10-50 at least. Basically a list I’ll go quickly through.
Step 4: Sift through the list
Once I have the tabs opened, I go through them using ctrl+tab for quick navigation. If I don’t like the project at a first glance, I’ll either close it with ctrl+w or go to another one. By the end, you should have at least one to five projects you can look more into. What do I look for on the CoinMarketCap page? Let’s answer this in the following chapters.
What is important to look at?
On CoinMarketCap or CoinGecko page of the project, you should see several important things. I’ll use one of my latest investments $SHIELD as a good example of a great CoinMarketCap page.
The first thing I look at is the description. Is there some or does the project have just a general description of the price and volume traded? I tend to only go with projects that have a good and detailed description. The longer the better. You can find the description if you scroll down under the price graph.
The first paragraph called Price Live Data is visible at every coin. This one is to be ignored. It’s pretty much a summary of all the stats on the page. Anything under this paragraph is what interests you.
When I stumbled upon Shield Protocol, I was immediately intrigued by how detailed the description is. Don’t get me wrong, you can find all this on their website or in their LitePaper, but the fact the detailed description is provided here, gave me some sense of professionalism. I read through it and found the project interesting to look further into.
The second most important thing for me are the links.
Here I look into a few things. The most important being, does the project have a website and is it operational? Some projects link a website that looks like it’s been made in the early 2000s. Here I follow a simple rule, “If your team is not willing to spend money on a website, why should I care to spend my money on the project?” Again, marketing is very important. The website should also have all the information that will decide your investment. If a website lacks something like a team description or even a simple project description, that’s a massive red flag.
The other important thing for me is the Whitepaper. After the description, this is the next thing I look for, as it describes the project and its use-case in full details. You can also find LitePaper which is the shorter version of that. For the example of a good, detailed whitepaper, look up Verasity’s $VRA. Just reading through it made me invest in that project when it still was at $0.0017. If not found here, the whitepaper might be oftentimes found on the project’s website. If I can’t find it anywhere, I don’t invest.
In the community tab, you can find the project’s Twitter. In crypto, Twitter is where most people look for their investments, so having an active Twitter team is important. I think the best example of Twitter marketing done right definitely comes from $WORLD’s Twitter page. Here, their team engages with the community on a daily basis and shares every update of the project.
Other things in the tab usually include the project’s Telegram, where the team can post their updates as well, and medium or blog page, where the team can describe their update in flowery details and not be limited by the character limit of Twitter or chaos of Telegram.
This is just a quick show of what the token is based on. Is it ETH based or BSC? You can also use this address in pages like Uniswap or Pancake Swap to invest in the token. If you want to see more places to invest, scroll down to the markets, although oftentimes not all will be listed. Always check the official website or Twitter of the project to see where you can buy the token.
What to research next?
Now you should have one or two projects you want to look deeper into before investing. You know what the project is and how it should work by reading its whitepaper and description on their website. What do I usually look for next? Well, as the next step, I go to the website and look for the important things:
The team behind the project is its heart. The best-case scenario is the team being public and well known. If you have people behind the project that already managed something similar in their career and were successful, the chances of the project’s success rise drastically.
Yes, there are great projects with anonymous teams, but since I am looking for low-cap gems, I want to have the highest risk management possible against a rug pull. An anonymous team is more likely to run away with its profits than a public one.
The team might be full of promises and big words of complex code, but if no one ever sees the code, that’s a red flag for me. The best solution for this is the project being either open source (with a public GitHub page where everyone can have a look at its parts) or the project being audited by a security company. These audits reduce the chance of the project being a scam as it has to be looked at and most importantly, paid for.
Audits show a few things. One, the team is not scared to show they have things to offer and that their code is solid. Two, the team has enough money for marketing and security. It is not here to just make a quick buck and run. And three, the team values their community, transparency and any possible worries it might have.
Personally, I tend to stay away from projects that have no audits or invest just very little.
Transparency and Roadmap
One of the most important things about the project is its transparency. I can sometimes even close my eyes when the team is anonymous if the transparency is outstanding. The more I can see into the project, the calmer it makes me as an investor.
Let’s take $SHIELD as an example here once again. Not only is their team public, but they are very transparent about what they are doing.
First, they have been audited, which I discussed above.
Second, their wallets are all public at the bottom of their page. You can see the movement of their finances and any red flags it might have in the future.
Third, they do regular updates and AMAs.
Fourth, they have a visible roadmap with ideas clear goals.
Roadmaps are very important for any project. If a project doesn’t have one, I don’t invest in it. It shows you things you can be excited about, it shows if the team is capable of meeting deadlines and it is also a great marketing tool that allows you to predict some good price spikes. For example, a big release for a project might mean more people hearing about it and thus investing as well.
Do the tokens have any value or use? Are they a finite resource? How many tokens belong to the team and how many are in circulation? Can the tokens be mined or minted? All these questions should have an answer. For example, projects that burn their coins regularly make sure that the price will steadily rise. On the other hand, if a project has infinite volume of tokens, like $DOGE, it will become almost impossible for it to reach high prices. See this article about market cap to understand the reasoning.
The utility of the token is also important. More people will buy the token if it has some sort of use. With $SHIELD, you get certain rewards and the token will be used for payments in their app. Another example is $ETH or $BNB, which are used to pay gas fees during transactions.
Another favourite thing of mine the tokens can be used for is staking. Can you stake the tokens and thus stabilize the price? Basically, the more tokens people stake, the higher the absolute price floor gets. Staking also oftentimes gives great rewards as an incentive. For example, staking $VRA will give you an additional 36.5% per year from your investment.
Competitiors and Market
Almost every project has competition in its market. This is a good thing because you can compare the projects, see what things this one does better or worse. Then you decide if you see it succeed in the future or if the market is already saturated.
If the project withstands this scrutiny, you can then look at the market cap of the competitors or the industry the project is targeting and see how far it can potentially grow. Here I usually compare the project’s market cap to the industry or the competitors, imagine it take a reasonable percentage of this amount and set up my target accordingly. If I see that the project can grow 50x from its current market cap, that’s how long I usually plan to hold the token.
Exchanges and fees
This is pretty much the last point I focus on. If I feel extremelly bullish on a project and want to make a big investment, I might even buy it through uniswap with the ridiculous ETH fees. Most often than not though, I prefer projects on centralized exchanges or on Binance Smart Chain. Since I don’t usually invest astronomical amounts into these projects, spending 25% or 50% on fees is just a big no for me. But then again, if I believe in the project with my whole heart, I am willing to invest an amount that will make the fees look ok in comparison.
In any way, remember that in crypto, these great investments can appear weekly, if not daily. It’s okay to pass on one if you can’t afford it or don’t want to pay these stunning gas fees. I oftentimes do myself.
Now you know my process from start to finish. Once I invest in a coin I research, I decided to write down a summary and post it on Twitter in a big thread, similar to users like @AdamHODL, @LisaNEdwards or @UniswapD, which were my big inspiration for this article and for starting with my own research. You can see the thread I wrote about $SHIELD right here:
In this thread I described all the things I found to be good reasons for investment and in this article you now found out how I got to each one.
And that’s it. You now know my entire process. Basically, I go through a listing website, find good candidates and then go through every little detail about the investment. If I like it, I invest in it. Most of the time, I am looking for longterm holds, so spending a day or two on a research that I will hold for months is not that big of a deal.
Hopefully, you’ve learned something from this article. If you’ll have any questions, post them below or send me a DM on my Twitter and I’ll try to answer as much stuff as I can. Happy hunting!