How To Research Cryptocurrencies

Before you register for an exchange and rush in to get some cryptocurrency, it is crucial to take a closer look at the potential (investment opportunity) or prospect. In this article, we outline some topics which you can take into consideration. Please note that this is not investment advice, allocating and investing funds into any asset remains your responsibility.
Before you register for an exchange and rush in to get some cryptocurrency, it is crucial to take a closer look at the potential (investment opportunity) or prospect.

In this article, we outline some topics which you can take into consideration. Please note that this is not investment advice, allocating and investing funds into any asset remains your responsibility.

Where To Start

Bitcoin Origins

The story of Bitcoin and blockchain would be a great start. For anyone who has not studied the subject, getting into cryptocurrencies may appear like quite the challenge. For example, you might have heard about Bitcoin at some point and decided that it is time to read up on the subject and perhaps get some for yourself, but where should you begin? In that case, you might want to start with the story of Bitcoin and blockchain technology; both have immense potential to spark your interest and carry serious implications for the future.

Ethereum and Altcoins

A logical next step might be that you want to get involved with some of the alternative cryptocurrencies (altcoins). It is essential to understand that Bitcoin and blockchain are the fundamentals and it is crucial to understand these principles (at least in a general sense) before moving on to specific projects that involve cryptocurrency and are based on – and make use of – distributed ledger technology. Again, there is much information to be found on the subject of doing your research, which we will summarize in a concise checklist of elements. In the cryptomanual, you will find a broad range of tabulated resources in which we have documented some of the (re)sources we have used in our research efforts.

"Do your own research: exercise due diligence, apply critical thinking, check your sources, control your emotions, analyse your findings and think about the motives of the involved parties."


Fundamental Analysis

Typically, when you are thinking about investing in a company, fundamentals are key. The financial reports, the numbers, the performance of previous years and transparency are of vital importance to you being comfortable with your investments. Performing proper fundamental analysis of your prospective investments will drastically reduce your risk and will provide you with the required confidence regarding your own investment decisions.

When considering cryptocurrency and blockchain projects, which are still in their infancy stages.

There usually are no financial reports, there is no track record of past performance, and many people base their decisions on speculation or hype. A company or corporation is centralized where a blockchain-based project may be (in part) decentralized and make use of open source technology. The community drives the development of these projects.

You can consider the following elements when performing your fundamental analysis on your project of choice. From our own experience: it is effortless to get enthusiastic about a projects’ idea, which inevitably leads to forgetting to do your due diligence.

Technological FoundationUsefulnessDevelopment TeamCommunityGovernance
How strong or innovative is the technology?Short term utility? Long term utility?Does this project have a dedicated development team?Is there a passionate and friendly community behind the project?Is the project decentralized?
Are there bugs, network issues or vulnerabilities?Does this project, and the corresponding token intend to solve a problem?How strong are their credentials? What is each member's previous experience?What is the level of activity in the community? How are people contributing?Is the project open-source (can you inspect the code for instance)?
How good is the codebase?Is it better than what we already have? Why?Active contributions? Check commit history or activity on GitHub?Company funding, venture capital, foundation backing?
Trade off between speed, scalability and securityIs there a foreseeable demand for the token? Is it useful?How is the project funded?Voting? Community influence?

Starting Points

How are you going to obtain all of this information? From what sources? For a total overview of the cryptocurrency market, we recommend starting at websites such as CoinGecko and CoinMarketCap (check our 5 tools to buy, trade and manage your crypto portfolio). These platforms provide information regarding the total market capitalization (and other metrics) of the cryptocurrency space and specifics on all of the enlisted projects. They provide you with the links to the project website, social feeds, chats and source code. For fundamental analysis, the primary source of information is most likely the project whitepaper, which is published by the development team. You will find the whitepapers on their respective websites.

The whitepapers outline the vision, mission, problem statement and proposed solution and technical properties of the token or coin.

In addition to the whitepaper, you should seek information regarding the level of activity of the developers and community. An excellent place to start would be the official social media and communication channels that the project has set up.

research cryptocurrencies
Following the projects’ progression remains key to assess.

If they are taking their road-maps, timelines and deadlines seriously and if they are transparent in their communication with the community. Other sources include community forums, video and blog sites. All these sources are a reliable way of obtaining diversified information and feedback from the community. Your effort stimulates the development of your understanding of what is going on with this particular project.

You will spend quite some time reading or watching videos, but this is undoubtedly required and will aid you in developing your personal opinion and beliefs. Obtaining diverse information, which you have gathered yourself, based on your experience, forms a crucial part of your decision whether to invest or not.

research cryptocurrencies

Coin Statistics

Now that you have thoroughly investigated your potential future buy by doing your research as mentioned above, you could have a look at the statistics of the coin or token. Again, you will find many of these elements in the whitepaper, and usually, you will find at least some statistics and metrics while performing a certain degree of fundamental analysis.

Technical Analysis

Technical analysis is a trading tool employed to evaluate securities and identify trading opportunities by analyzing statistics gathered from trading activity, such as price movement and trading volume. Unlike fundamental analysts, who attempt to evaluate a security’s intrinsic value, technical analysis focus on charts of price movement (for example the 50-day and 200-day moving averages to identify significant support and resistance levels) and various analytical tools to evaluate a security’s strength or weakness.

Technical analysts believe past trading activity, and price changes of securities are better indicators of their likely future price movements than the intrinsic value of the securities themselves.

They think that the fundamental value is included in the stock or coin price. Traders have many tools at their disposal provided by the technical analysis (TA), which they use to analyze charts. Traders use technical analysis as a basis on which they time their buy and sell decisions. However, if you are not an experienced trader and have no clue what technical analysis is, you could learn the basics to prepare yourself with the knowledge to assess the optimal entry or exit point in this volatile market.

Market Psychology & Sentiment

The technical analysis aspects contribute to the economics of supply and demand at certain price levels of the (digital) asset. Market psychology and market sentiment also play a considerable part. So, the market for any (digital) asset consists out of people, businesses and institutions from all over the world. Moreover, all of which tend to behave both rational and irrational, and when markets move, emotions play a significant role. So, recognizing this will be vital for success.

Bear & Bull Markets

When bear markets hit, there is fear, uncertainty and doubt (FUD). Moreover, people tend to sell since the news is overwhelmingly negative. So, bear markets can last for a very long time, which eliminates weak hands early on in the process. Furthermore, people who base their actions on what they see or hear usually failed to do fundamental research in the first place. In these scenarios, if you have performed your due diligence and feel confident about your previous investment decisions. So, you will have the strength to hold on for dear life (HODL).

In other words, which enables you to ride out the storm and survive the potential onslaught of a cryptocurrency bear market.

When sentiment is low, and selling seems to be the way to go. Therefore, think again because it might be time to buy. If you didn’t acquire any securities, stocks or coins, bear markets are an excellent time to consider entering the market providing you to do the research. So, when timing buy-ins, technical analysis can come into play. You should feel more confident due to your fundamental analysis efforts. Moreover, you have just spotted an overall negative market sentiment. People are selling, as indicated by the price and chart movement.

research cryptocurrencies
When bull markets hit, there is a high degree of fear of missing out (FOMO), which can lead to overpriced stock.

Trading volumes skyrocket and everybody seems to join in on the hype. Again, market sentiment and psychology play a huge role and are usually severely influenced by a torrent of positive news which creates a feedback loop. At the end of a bull run, the overpriced stocks plummet which may cause additional risk if you didn’t time your exit point carefully.

Entry & Exit Strategy

Timing Your Buy & Sell Orders

Keep in mind, the price is what you pay. Moreover, the value is what you get – pay too high a price, and returns are decimated. So, the value of a stock is relative to the number of earnings. It will generate over the life of its business. In particular, this value is determined by discounting all future cash flows back to a present value, the intrinsic value. So, when you buy in too high (at unsustainable price levels) – the return that arises as an asset gravitates back to its intrinsic value over time will erode. Therefore, act greedy when others are fearful and reap enhanced profits. Explained; buy low, sell high and try to keep those emotions in check while making investment decisions.

There are several platforms you could use to have a go at technical analysis.

Moreover, there are even platforms that provide you with several indexes and a whole bunch of aggregated services. Tradingview offers a platform to analyze charts of different markets which also hosts a community of active traders who post and share trading ideas. In addition, CoinCheckUp is a research platform which offers – amongst other things – different analysis methods and tools to help you get started. Furthermore, there are plenty more sources and platforms you could use, which we leave up to you to discover.

More Posts

Top Crypto Hardware Wallets 2020

Hardware wallets are not a new phenomenon in the tech industry. However, in the world of cryptocurrency, we consider hardware wallets to be amongst the most-secure cold storage solutions hand down. There is no doubt that hardware wallet growth has massively benefited from the rapid expansion of the crypto and blockchain spheres. Various hardware wallet manufacturers have been working overtime in the past years to create viable products to keep up with demand. As more people start to realise the potential of cryptocurrencies and proceed with buying their first crypto, they are also going to want to keep their crypto safe. Are you looking for a reliable hardware wallet for your crypto coins? Check out this comprehensive review for the best hardware wallets on the market today.

Become Your Own Central Bank

When you own cryptocurrencies, you store your assets in such a way that only you can access them, you have full control at any time, without counterparty risk. Banks usually keep a fraction of what is on their balance sheets as a reserve due to their business model of providing loans. Put plainly; banks can provide loans while maintaining very few funds on their balance sheet. This system is widely known as fractional reserve banking.

Upgrade Your Online Privacy & Security

In terms of online privacy and security, there are several things you should pay attention to when you are browsing the web. All of your online activity generates data. You have to realize that your data is extremely precious to third parties, especially in the connected and digital world we live today.

Not Your Keys; Not Your Crypto!

Centralized exchanges do not provide you with your private keys. Instead, they let you log-in with a well known username-password combination. Not owning your private keys implies that you do not truly own your assets. Instead, the exchanges are the “custodian” of your assets, and they hold your funds. Hardware wallets enable you to store your holdings while owning your private keys. This way, you can access your funds by yourself without the need of third parties.