How To Do Crypto Research: The Best Ways to Get Started
Key Questions Answered
The meteoric rise of the crypto industry over the past few years has attracted a lot of attention from the world. Despite its growing popularity, finding the right assets to invest in can be difficult for retail investors who do not know how to research crypto coins. By properly doing your own research (DYOR) in crypto markets, crypto trading, and altcoins, you can better identify promising opportunities, and more importantly, safeguard yourself against scams.
How to start investing in cryptocurrency?
While experienced investors know that the research process is different for everyone, there is still a basic framework that every trader can follow and build upon. It is important to understand that just as with investment strategies, research strategies should be continuously refined over time. The more projects you research, the easier it will be for you to pick up on signs that may alert you to promising projects or serve as red flags.
Before starting to research any project, traders should first ask themselves what they are looking to get out of crypto investing. Are you looking to research altcoins to identify a low-cap project with room for high returns, or are you looking to research established crypto coins with a more well-defined team and market? By understanding what your short- and long-term goals are, you will know where to start looking and be able to identify the projects that suit your investment goals.
Whitepapers serve as the most critical step of due diligence for potential investors, and should be considered required reading before investing into any project. Well-written and complete whitepapers can indicate the expertise or trustworthiness of the project team, while incomplete whitepapers can serve as an early red flag.
Whitepapers are one of the most effective ways for developers to communicate the values of their project, along with new technologies, solutions, or other existing information that may not be readily available. For example, the Bitcoin (BTC) whitepaper provides both an outline of Satoshi Nakamoto’s vision for the project, along with a detailed history and explainer for proof of work (PoW) and incentive mechanisms. Consider reading a project’s whitepaper the first and most important part of the research process, as most of the basic information required to get started with crypto research can be found in them. Phemex has a full guide on how to read whitepapers.
What Info Do You Need as a Starting Crypto Investor?
Before you set out to research any specific project, it is advisable to first gain a general understanding of crypto as a whole. Look into the concepts behind Bitcoin and Ethereum, as blockchain and smart contract technology has had the greatest influence over the industry and the majority of crypto projects. Phemex Academy has hundreds of articles for traders looking to familiarize themselves with general crypto concepts or get an overview of a specific project.
To understand how to start investing in cryptocurrency, traders must first get an idea of what information they should be looking for. In addition to reading the project’s whitepaper, look for general indicators of market performance, such as market cap, price data, news, and public sentiment.
Where to Get Important Crypto Information?
- Market Cap and Price Data: Crypto information websites such as CoinMarketCap and CoinStats provide detailed information on the market cap, price history, volume, and circulating supply of almost every crypto project in existence. As these websites are ultimately data aggregators, it’s also good practice to check and compare the prices of major crypto trading websites. Phemex is one of the best websites to buy crypto and provides a wealth of transparent data, such as the current price, 24h change, 24h volume, and 24h turnover. To find this info, head to the website, then click the Markets section on the top navigation bar to see a list of the coins traded on the exchange.
List of coins traded on the Phemex spot market (Source: Phemex website)For a more detailed view of a chart, simply click the Trade button to the far right of any of the listed coins. This will bring you to a trading screen with a highly customizable chart, along with an order book that transparently lists all recent trades and open orders on the platform.
Order book and chart for BTC/USDT on the Phemex spot market (Source: Phemex website)
- News: While market fundamentals and whitepaper analysis are great, the mark of any responsible investor is keeping up with crypto coin updates and how they may affect the market. It is a good idea to look up any project you’re interested in on a few trusted news sources. Look for articles that have been published over the last few months, along with the most read articles since the project’s launch. This will give you a general overview of the project’s development, along with any fumbles or incidents that may have occurred along the way. If you find that there is very little news on the project, this could be a sign that it has failed to generate much interest from the market. The best crypto news websites are generally large publications that have built up a solid reputation over years of work, as they have far more to lose by spreading misinformation. While there is nothing wrong with getting your crypto info from smaller sources, be wary of influencers and remember that old adage that advice that was paid for should be considered dishonest advice.
- Public Sentiment: Perhaps the most difficult information to source reliably, public sentiment is nevertheless critical to projecting the performance of both specific crypto projects and the market as a whole. While social media such as Twitter, Facebook, and Telegram groups are undoubtedly great ways to get a pulse on public sentiment, they should be considered critically as they are also common sources of misinformation. One of the most important things to remember while doing research is to never buy into the hype. Consider things objective through public sentiment analysis tools such as the Google Trends analyzer.
Trend analysis of Dogecoin from March 11, 2020 to March 11, 2022 (Source: Google Trends)As we can see from this example, market interest in Dogecoin (DOGE) experience three massive spikes in the first half of 2021, but has since returned to late 2020 levels and largely flattened. This tells us that Dogecoin has been heavily reliant on major event (largely tweets by Elon Musk) for public interest, and that this interest has largely died off.
What is Fundamental Analysis and Technical Analysis?
Once you have familiarized yourself with a project and obtained its price data, you can further your research by analyzing market and price movements through fundamental and technical analysis. While analysis may seem intimidating at first glance, proper use of fundamental and technical analysis can help check our preconceived notions and provide greater confidence for the execution of trades.
- Fundamental analysis (FA) is based on the idea that there is a huge variety of macroeconomic and microeconomic factors that affect the price of an asset. This can be primarily viewed from the lens of the asset in question, its relevant industry, and current state of the economy. By learning how to do fundamental analysis, investors can better predict the long-term prospects of the asset.
- Technical analysis (TA) is concerned with predicting the short-term movements of asset prices. Unlike fundamental analysis, TA focuses on objective chart movements rather than outside factors such as market sentiment. The technical analysis of crypto such as Bitcoin and Ethereum (ETH) works in the exact same way as the technical analysis of financial markets.
A detailed comparison of fundamental analysis vs technical analysis can be found on Phemex Academy, along with hundreds of articles on different technical analysis strategies and charting. Another great resource is TradingView, which is considered one of the best crypto chart websites and a great analysis tool to learn technical analysis through patterns and indicators.
There is no greater source of information on a crypto project than the project’s resources themselves. Critical analysis of a project’s website, team, and whitepaper is the first step to any serious attempt to DYOR. Once you are done researching a project, it is always a good idea to compare it with its competitors. Make sure to ask yourself tough questions no matter how much you may like the asset you’re researching. Which project team seems more qualified? Which seems to have a better real-life use case?
Analysis is a great way to verify your research or provide greater certainty that your projections are accurate. The boom of the crypto industry means that the market has been flooded with new projects, many of which are trying to do the same thing, but better. Traders can use fundamental analysis to determine the long-term prospects of assets they wish to hold and technical analysis to project short-term movements in the market.
Many altcoins aim to build on and solve the issues of foundational projects Bitcoin, Ethereum, and Tether (USDT). For every project you research, you gain a greater understanding of crypto technologies and the industry as a whole. Remember that while there is no such thing as perfect knowledge, the constant and disciplined application of due diligence will protect you from scams and losses while gradually improving your skill as a trader.