How to Research a Cryptocurrency Before You Buy It

In collaboration with CoinSmart

“Do Your Own Research!” (DYOR) is the battle cry of crypto-purists, but where do you start and what do you look for? The CoinSmart* exchange platform has resources to help you hone those sleuthing skills. CoinSmart does the legwork for you before a coin is listed on its platform. Save your bacon and avoid getting screwed with these 8 crypto research tips straight from the pros.  

*Please Note: CoinSmart is now part of WonderFi and the platform is not accepting new signups. If you’re looking for the best crypto experience in Canada, we recommend signing up for Bitbuy, another licensed Canadian cryptocurrency trading platform operated by the same parent company, WonderFi. With Bitbuy, you will get access to an improved experience on web and mobile, staking rewards, Private Wealth services, and an advanced trading interface.

1. Consider the source 

If you hear about an exciting new coin that’s about to “moon” you need to stop, keep a level head, and think critically about where you got this information. Never buy into a coin just because someone told you to. Be wary of buzzy comments that have nothing to do with the original post, or strangers who send you unsolicited direct messages. 

Hype doesn’t mean you should avoid the project. It is time to DYOR, no matter how popular the coin is or who told you about it. CoinSmart’s free GetSmart Hub has a range of article topics that include a deep dive into hyped coins getting the most attention. 

2. Read the white paper 

A white paper is a document the developers provide that explains the project, the coin’s purpose and use, all underlying technology, and what makes it unique. It also outlines the team, the source code and blockchain, and other details. Legitimate projects should have a white paper that is well-written, easy to understand, and includes data to back up their claims. Red flags include poorly written white papers, promises that are too good to be true and don’t reveal the source code, and using a private blockchain. 

CoinSmart assesses the white paper before a coin is listed on the platform. They also look for defects in the source code as well as technical or security risks to the supporting blockchain. 

3. What is the use case?

The white paper describes the purpose of the coin, known as the “use case.” The use case tells you exactly why the coin was created, how to use it, and how it will achieve a specific and clearly defined function or purpose. A strong use case should solve a problem.   

CoinSmart gives you access to many of the most popular cryptocurrencies, and they’re always updating their coin offerings, so check the platform often. You can easily diversify your investment across several projects without putting all your eggs in one basket. 

4. What are the tokenomics?

The token-what-now? Tokenomics refers to the economic features of a crypto project that make it appealing to both users and investors. It looks at the coin’s utility, supply, demand, distribution, and other metrics. A few key metrics to know include how many coins are in circulation right now, the maximum supply, and the total market capitalization. 

For example, a coin with an unlimited supply is called “inflationary.” It is likely to lose value over time. During the vetting process, CoinSmart takes a close look at the tokenomics of a coin before it gets listed on the platform. 

5. Who created it? 

A good white paper should identify the developers, their professional background, education or other relevant skills, and how they’re contributing to the project. Search their names on professional and social media sites like LinkedIn, Twitter, Instagram, Facebook, etc. At the very least, a Google search should reveal some sort of digital footprint that verifies who they are. 

Avoid projects with unknown developers. A simple solution is to let  CoinSmart do the sleuthing for you. Again, the vetting process includes investigating the developers and their backgrounds whenever possible.  

6. Scope out the competition

If the white paper looks good and there’s a solid use case, your next step should be scoping out the competition. Are there other coin projects out there trying to do the same thing? If there is strong competition in the market, and this coin doesn’t bring anything new to the table, it’s unlikely the project has a future.  

CoinSmart’s GetSmart Hub has great articles comparing competing projects like Dogecoin vs. Shiba Inu or Avalanche vs Polygon. Once you understand the basics and what to look for, you can apply that knowledge to other projects to really level up your coin-hunting skills. 

7. Assess the roadmap 

A roadmap is basically a business plan. It includes short, medium, and long-term goals that are time-bound with target dates. While a legitimate project doesn’t always turn into a successful one, a good roadmap gives the project a fighting chance. The CoinSmart team assesses the project’s roadmap for growth before it‘s listed on the platform.  

CoinSmart looks for the following: a roadmap that includes things like the technologies, tools, key performance indicators (KPI), and budgets the developers will use to meet milestones by the target date. The roadmap must show how it prioritizes objectives to support the success of the project. 

8. Size up the community  

Community support is a key indicator you cannot ignore. A promising crypto project should have an organic and engaging community focused on helping the project succeed. Legitimate coin projects are more likely to have polished websites with links to various social platforms like Discord, Telegram, Twitter, Facebook, etc. A healthy community includes developers who are active in discussion forums, engage with members, and give frequent updates. Ask Me Anything (AMA) sessions with respectful discussions that welcome questions, concerns, and criticisms are another good sign. 

A red flag is any project with communities that use toxic aggressive language, mute or block people for raising concerns, and organize coordinated pumps to manipulate the price.

Get smart with CoinSmart

The crypto market can be a risky place, but CoinSmart stacks the odds in your favour. They’ve got the resources you need to level up your detective skills. Until then, they do the grunt work for you; the Watson to your Holmes. Cryptocurrencies available on the CoinSmart platform are examined to ensure they meet specific standards to reduce your risk. Are you ready to kick FUD (fear, uncertainty, doubt) to the curb? Open your CoinSmart account today and invest with confidence.

*Please Note: CoinSmart is now part of WonderFi and the platform is not accepting new signups. If you’re looking for the best crypto experience in Canada, we recommend signing up for Bitbuy, another licensed Canadian cryptocurrency trading platform operated by the same parent company, WonderFi. With Bitbuy, you will get access to an improved experience on web and mobile, staking rewards, Private Wealth services, and an advanced trading interface.