The world of crypto can be a daunting place to venture into and with the inherent risk of capital, understanding how to tell a good project from a bad one could mean the difference between a bumpy ride or a smooth ride.
Here are 10 data points to help you determine if a project is worth investing in or should be desperately avoided.
Utility – the differentiating factor
The usefulness of a crypto project can mean the difference between a successful or unsuccessful project tenure. The reason for this is that value-added longevity is a critical component in determining a cryptocurrency’s probability of survival – after all, if there is no value to be had, what is the point?
Without purpose or value, demand may drop and eventually the project may cease to exist, especially when times get tough and a bear market hits.
Best Holder Token Percentage: Data is your best friend
Now, this one might seem like an odd choice, right? However, this becomes an important aspect based on the ratio of token holdings to the ratio of major holders.
So, suppose you find a project and 80% of the tokens are held by the top 100 holders. In this case, it is likely that the majority is distributed as a team or that the whales hold the majority and can easily manipulate the price action accordingly.
Marketing with eyes on the prize
Having eyes on a project is certainly an important aspect. Quite simply, marketing is necessary in any expansion, whether it’s investing, driving engagement, or building a community or product. It can often be difficult to follow or follow all the announcements of a budding project. Using data aggregators can help you track announcements and changes to projects.
Distribution of tokens: look at the numbers
For a project to earn the trust of potential investors, a valid token distribution is imperative. Improper distribution of tokens can lead to token concentration, lack of decentralization, conflicts of interest, and lack of liquidity. These issues can significantly undermine the credibility of the project, hinder growth and adoption, and potentially lead to manipulation of the token’s value.
Tokenomics: Here’s where you need to be careful
Supply, demand, distribution, longevity – the list goes on. All of these and more can fall under the Tokenomics department of a project. Likewise, all of these can play an important role in deciding whether tokenomics signals a good or bad project because numbers matter, and if they don’t look good in the long run, a project’s chances of longevity are in jeopardy. game.
Community is key
A strong community can add absolute value to almost any project because it provides a backbone, giving the stability, commitment, and trust that projects so desperately crave.
Weak or non-existent communities tend to indicate a lack of trust or interest, which can be a bad indicator for an investment. High community interest and growth can add sentiment and positivity within a project, which can lead to increased longevity and added value.
Project team: Who is who
Everything tends to be stronger with a team and it remains the same with crypto projects. The team can determine the potential for success. The combination of talent and experience can give a project a better chance of longevity and can also help build trust and community aspects.
Roadmap: for those who like to follow
We all know how important that reliable map can be when lost on the road, now imagine the roadmap didn’t live up to its promises and areas were missing. That would cause problems – especially with trust.
Well, that applies to the crypto projects roadmap. If deadlines or promises are not kept, not only does this impact the investor, but expansion and confidence are also lost. Determining whether a roadmap has been followed and whether goals have been achieved is crucial in determining whether a crypto project is worth investing in or not.
The number of active addresses in a cryptocurrency project can provide vital information. Active addresses represent the number of unique addresses that have sent or received transactions on a particular blockchain network within a specific time frame. The higher the number of active addresses, the stronger the user-based engagement.
Low amounts of active addresses can indicate a lack of interest or confidence and conversely illustrate a problem in the overall project. This is a credible area to consider when determining if a project is good or not so good currently.
Those good old exchange lists
Crypto projects gain traction by being in the public eye and accessible, which is exactly what exchange listings do. The more exchanges a token is available on, the more likely it is to succeed, and for many reasons – access, stability, growth, engagement and more. The bigger the trades the better, so when looking for signs of whether a project is good or bad, multiple trade listings and their level can give a better indicator.
Overall, there are many factors to consider when deciding whether a project is good or bad and these are just 10 data points that we believe could help decipher the many decision-making processes and choose the projects you value the most to deploy capital into.
When focusing on what distinguishes a good project from a bad one, we have not considered the project itself, the unique utilities driven by tokenomics and enforced by smart contracts, and the financial incentives put in place. in place to attract new holders.
The information provided here is not investment, tax or financial advice. You should consult a licensed professional for advice regarding your specific situation.
Ilias Salvatore is Product and Brand Manager at Trade Flooz – a place to buy, trade and track crypto with real-time data and alerts.
This article was published by Cointelegraph Innovation Circle, an vetted organization of senior executives and blockchain technology industry experts who are building the future through the power of connections, collaboration and thought leadership. The opinions expressed do not necessarily reflect those of Cointelegraph.
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