New crypto projects launch everyday, and they can be a great opportunity to invest. There have been crypto projects that were initially not taken seriously that have ended up bringing unprecedented return on investment.
Many crypto projects also turn out to be scams though, so there’s a need to scrutinize projects you intend to invest in. Investors have rushed into projects they thought would be rewarding, only for them to end up regretting.
Before putting your money into a project therefore, there are key parameters to check out. This will save you a lot of headache later, and also significantly improve your chances of succeeding in your investment. The following are the five key things to keep in mind when selecting a project.
The team behind a project is very significant, as it can determine if the project is legit or not. For example, a project that has a team of renowned people in the industry can be a reliable one to invest in. The project should also be willing to reveal who the team members are.
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If the team is reluctant to tell you about their team members, it is probably a red flag. Conversely, if the project has a team that has people with clear track records, it is probably a good project to consider.
Projects without clearly revealed team members are often fraudulent, because when such a project collapses – probably due to a rug pull, the team can quietly disappear without a trace. Reputable industry players won’t risk their names by defrauding investors in their project.
A project with utility is a project that will potentially do well. If a project doesn’t have a clear use case or use cases, its chances of succeeding are very small. How does the project help solve any real problem? Does it fit into the current situation and does it have a chance in the future?
Many projects have launched in the past based on sentiment and while some of them end up succeeding because of backing from some key figures, they usually fail woefully. It doesn’t matter if the project explodes initially, it will eventually fail when the chips are down.
Every promising project has a list of top investors behind it. For example, you may see some major venture capital firms supporting it with substantial funding. The reputation of the companies backing it matters, because it gives you a clue of the project’s integrity.
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Don’t be a hero by being the first to invest in a project with no history of support from some key players. Investing in such a project can end up disappointing you, because it wasn’t good enough to attract quality investors, and so will not last.
Market valuation is the total value of a project’s tokens, and is an excellent indicator of the project’s potential. A low initial valuation means the project has growth potential that can be rewarding in the future.
To check the market valuation, check if the project’s initial market cap is lower than their expected fair value. If this is the case, then the project may be a lucrative investment opportunity. If It’s the opposite then you may wish to stay away from such a project.
Last but by no means the least, check the tokenomics of the project. Tokenomics refers to the distribution or allocation of the project’s tokens. This is important because how tokens are distributed can affect the value of the token in the long run.
The tokenomics can be inflationary, leading to a fall in the token’s value. Projects with inflationary tokenomics may not even be a problem if there’s a burn mechanism in place to reduce the circulating supply.
Check all of these details before committing your funds as an investment in any project, and you’ll increase your chances of success.
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