If there was a contest for the most popular advice on the cryptocurrency market, then “do your own research” (DYOR) would be at the top. Even when investors try to do their own research, this phrase may still chase them in many articles and crypto community discussions. But after seeing this advice, some crypto newcomers may ask themselves where to begin and how much research is enough. Here are some tips that may help you throughout the research process.
Why is it important to DYOR?
The crypto market is full of advice and sometimes advice may be hiding something. When crypto newcomers try to find an asset with high potential, they often begin by searching rather than researching. After visiting crypto social media accounts and forums, new investors may encounter users who advertise assets they bought to others in hopes of pushing the price upwards. Alternatively, these users may be a part of the project’s marketing team and are trying to raise awareness. This is known as shilling and quite often, it can be difficult to distinguish the difference between shilling and unbiased opinions.
Crypto social media may experience spam attacks by different users and projects. People with malicious intent may create numerous fake accounts, attempting to trick investors and form fake hype around an asset.
If investors tend to rely heavily on the word of others, they can be easily deceived. Because of that, crypto enthusiasts are prone to follow the DYOR philosophy and often introduce it to newcomers. Sure, some crypto enthusiasts may reveal their in-depth knowledge to newcomers with good intentions, but DYOR can be insurance against attempts to deceive investors.
Where to start researching?
Once you select the asset you want to research, you should first try to learn about the value it brings to its users. You can do that by checking the project’s website and whitepaper. Understanding the utility, use cases, and issues the project tries to solve, may help you realize its general purpose. At the same time, checking the project’s roadmap may provide vision on further project developments and goals.
However, what the project says about itself is only one side of the coin. That’s why it can be useful to monitor the attitude of the project’s community and understand why users support it. The community may help you realize how developers fulfill set goals and what use cases dominate the project. If a project has no utility or community, then it is either just beginning, or only suitable for speculation currently.
After learning more information about the project, you may want to compare it with other similar projects to understand what makes it unique. Projects in highly competitive fields may find new users more easily but it may be more difficult to attract them without significant advantages over competitors. If a project lives in its own field and doesn’t have any comparable projects, then it may be useful to analyze whether or not the idea has long-term value. If a project is just a copy of another project and delivers nothing new, then its popularity and adoption could become major factors in its development.
Why look at the market and on-chain data?
If you just look at the project and immediately find it “worth investing”, it can make your research quite subjective and can lead to hasty decisions. To add an objective layer to your research, you can dive into market data such as, trading volume, recent news, market sentiment, etc. as well as on-chain data like, activity within the network, interest in the network ecosystem, change in users’ behavior, etc. Analyzing this information may help you see current market conditions and how many users are participating in network development.
In addition, it’s important to keep in mind that an asset’s value is not always equal to its market price. An asset can be considered undervalued or overvalued depending on recent price performance. The price is a final product of numerous factors, some of which are based on pure speculation. By monitoring market and on-chain data, it can be easier to figure out whether recent price movements have a strong foundation or are just outbursts of emotion.
How can research platforms be useful?
When it comes to market and on-chain data, there are a lot of ways to collect it. Trading platforms may share market data for free via APIs, and on-chain data exists on thousands of nodes running across networks. The main issue is finding a well suited interface to help you find useful information for your research.
Collecting information on its own can be time-consuming. That’s why there are numerous platforms in the crypto space that wrap up a plethora of information in convenient charts and tables. Let’s take Messari for example. Using this platform, it is possible to find information about price performance and on-chain metrics of numerous cryptocurrencies, as well as market news and information about recent network upgrades. Having different types of information in one place can make research and monitoring much faster and easier.
However, the main advantage of research platforms — the amount of information — can become a major drawback. Crypto newcomers who don’t know how to work with data may “overuse” it, confuse themselves, and face analysis paralysis. For that reason, it can be useful to learn more about different aspects of crypto projects gradually, looking at them from different angles.
The monitoring and investigation of cryptocurrency networks is a continuous process. While new assets appear, established projects may reach a significant milestone or launch new features for their users. And to understand the impact of these events, you may go and do research once again. CEX.IO API and research platforms can be useful tools in this journey, offering a plethora of information about market conditions and saving you a lot of time when staying up to date. But don’t forget that the quality of the research depends on the amount of time and effort that has been invested into it.