Girls and gents, welcome to the ultimate episode of the Crypto 101 sequence.
(…last for now. Possibly 👀)
We’ve already coated the fundamentals: alternative ways to commerce, the place to commerce, and the place to retailer your cash.
However that also leaves one huge query: how do you determine what to really purchase?
Which is precisely what we’re taking a look at as we speak. Let’s roll 👇
Shopping for crypto isn’t nearly guessing what’ll go up. It’s about understanding what you’re shopping for – and why folks would possibly discover it worthwhile.
So, when you don’t wanna get rugged in your first day, it’s value asking your self these questions earlier than investing in a challenge:
1/ What does the coin do?
Is that this token helpful, or is it simply… there?
You need a clear objective. For instance:
ETH powers sensible contracts on Ethereum;
UNI lets customers vote on modifications to the Uniswap protocol.
To seek out these items out, test the challenge’s whitepaper. You don’t must learn each phrase – simply sufficient to seek out out:
What drawback are they fixing? How? Is their answer distinctive, helpful, or already achieved higher elsewhere?
If the challenge itself can’t reply that clearly, that’s a 🚩
2/ Who constructed it – and are they legit?
The group behind a challenge could make an enormous distinction.
Positive, there are some nameless devs who’ve constructed unbelievable issues, however usually, you wanna see actual names with actual expertise.
Do some digging. What have they labored on earlier than? Have they got business connections? Are they backed by identified VCs or built-in into different platforms?
For instance:
Solana was began by former Qualcomm engineers;
Polygon has partnerships with giants like Reddit and Disney.
If all you discover in regards to the group is a obscure web site, a generic roadmap, and a Telegram group run by somebody named “CryptoKing420” – that is a 🚩
3/ How do the tokenomics work?
Tokenomics – or token economics if we’re talkin’ full authorities names – is principally how a crypto token is structured.
And these items issues quite a bit. You would have the neatest challenge ever, but when the token mannequin does not make sense, it may well nonetheless crumble.
Right here are some things value checking:
👉 Is there a max provide?
If not, new tokens will be minted endlessly, which may improve provide and influence worth stability over time.
A capped provide (like Bitcoin’s) helps restrict inflation.
👉 Who holds a lot of the provide – early traders, the devs, or the group?
If most tokens are held by insiders or early traders, there is a threat of them dumping later and crashing the value.
A extra even distribution reduces that threat and reveals stronger group help.
👉 How are new tokens launched?
Initiatives usually have “vesting schedules” that unlock tokens over time.
If an enormous unlock is coming quickly, that might flood the market and drag down the value, particularly if insiders determine to promote.
👉 And lastly, why would anybody need to maintain this token long-term?
Does it give entry to options, voting rights, staking rewards, reductions? Or is it simply one thing folks purchase solely as a result of they hope it’ll moon?
If there’s no sturdy use case or purpose to carry, long-term demand is likely to be restricted – and with out demand, costs normally don’t maintain up both.
TL;DR: if a token has limitless provide, no use case, and is usually held by a small group of early consumers – that’s not a long-term funding. It’s a setup for a pump-and-dump.
Robust tokenomics received’t assure success, however dangerous ones usually result in failure.
4/ What are the market metrics saying?
Some fundamental numbers can provide additional context:
👉 Market cap offers you a tough concept of how huge (or dangerous) the challenge is.
👉 Quantity reveals how actively the token’s being traded.
👉 Liquidity tells you the way simply you may transfer out and in with out affecting the value an excessive amount of.
A token with good market metrics is commonly extra sustainable in the long term.
5/ Is the tech truly any good?
This half will get missed manner too usually. However when you’re gonna put money into a token, it’s best to know if it’s constructed on stable floor.
Begin by wanting on the underlying tech:
What sort of blockchain is it on? Can it scale? Is it safe? Has it been hacked earlier than – and in that case, how did the group reply?
One other tip: test how usually the challenge is up to date.
Is the GitHub lively? Are builders nonetheless constructing?
A quiet repo = a quiet challenge = most likely not what you need.
Take Polkadot, for instance – it’s constructed for flexibility and safety, with a constantly lively dev group. That form of regular progress tends to replicate long-term dedication.
6/ What’s the group vibe?
Crypto isn’t simply code – it’s folks.
A robust, engaged, non-bot group can drive adoption and construct belief.
Search for:
👉 Exercise on Discord, X, Reddit;
👉 Actual discussions (not simply “wen moon”);
👉 Neighborhood-led initiatives or governance proposals
A token with a robust group behind it could have extra help and endurance.
7/ Are there regulatory dangers?
Not the enjoyable half – however nonetheless vital.
Control whether or not the token is likely to be thought-about a safety within the US or elsewhere. Is the group working transparently? Are they actively making an attempt to adjust to laws? Are there lawsuits, bans, or investigations in main markets?
You don’t want a regulation diploma, but when one thing appears shady, it’s value being cautious.
So yeah, studying a coin isn’t simply checking charts – it’s about doing a little bit of digging. And when you haven’t appeared into the fundamentals, you are most likely betting, not an knowledgeable determination.
Asking the appropriate questions offers you extra context – and that may be useful it doesn’t matter what the market’s doing.
Oh, and earlier than you go – when you preferred this week’s beginner-friendly breakdowns, reply or faucet that score button under to let me know. I would cook dinner up one thing like this once more sooner or later 👀
Have a chill weekend, don’t get rugged, and I’ll see you Monday with the standard format!
Now you are within the know. However take into consideration your mates – they most likely do not know. I ponder who may repair that… 😃🫵
Unfold the phrase and be the hero you understand you’re!
