One of the best investing tips from professionals is “Do your own research.” This applies to stocks, real estate, business, start-ups, and more recently, cryptocurrency. As it is oft-repeated, it may come across as an empty platitude. It is, however, very sensible advice because it will affect your finances. DYOR is even more important regarding cryptocurrency. The many stories of instant crypto millionaires make it appear that investing in crypto is easy, but it is a volatile market and it will take time to build your knowledge. You need to analyze the value a crypto coin promises to deliver, as well as the risks involved. When you are well-informed, then you can make better choices and earn additional income.
It is important that you make your own informed decisions because shilling is common in crypto. Shilling is when celebrities and high-profile tech persons promote certain coins, hoping to raise the value. Instead of listening and blindly following what famous people say, arming yourself with the right information will get you somewhere better.
1. Understanding the basics.
Read about the fundamentals. Do not limit yourself to what is on the internet. Buy or borrow books about crypto, blockchains, cryptography, and economics. Aside from reading books about, you can also read academic articles and blogs. Listen to podcasts. Take part in legitimate forums in real life or online and do not be afraid to ask questions. Seek crypto skeptics and weigh their arguments. Looking at both sides will give you a better picture of how it all works. Learn the technology behind crypto coins and what problem it aims to solve.
If you are already leaning towards a particular coin, read its white paper. A white paper is a document that gives a thorough description of the coin’s features, its technical specifications, what it will be used for, a roadmap, tokenomics (how it creates value), and the team behind it.
2. Evaluate the development team
People behind authentic cryptocurrencies make themselves known. You can examine their educational and professional histories, as well as their track record in the crypto space.
3. Look at adoption and usage
How many users are there? What do they use the coin for? Can you use the coin for day-to-day expenses? If you can, how many establishments or organizations accept it as payment? The answers to these questions will give you an idea of which coin will best serve your needs.
4. Engage in the community
There are communities in forums and social media, where you can read through the sentiment and interest in cryptocurrency and specific coins. You will develop a better understanding of the coin from the point of view of ordinary users. It will take a bit of skill, though, to wade through the muck in these platforms; but if you have the basics covered, it will not be difficult finding the gold.
5. Consider and understand taxation of digital assets in your country
Find out how your government considers crypto. Is it currency or property? If you earn an income through crypto, how much will your taxes be? Is crypto regulated? What are the limits in the regulations? It will serve you well to know these so you can plan accordingly.
6. If you want to learn more about a coin’s technical information, CryptoVantage recommends these starting points
- Get reliable usage and transaction data
- Examine Total Value Locked (TVL)
- Data on market liquidity
- Figure out market cycles
7. Remember “not your keys, not your coins”
By the time you have bought crypto, you already know that you do not actually hold your coins. You hold the keys to where your coins are in the blockchain. Safeguarding your keys is just as important. Security experts do not recommend leaving your coins in an exchange. Your keys will be safer you’re your own crypto wallet. Choosing the right wallet will require you to do another DYOR as there is a wide range of wallets. For Monero alone, an XMR wallet may be web-based, an app on your device, a paper wallet, or a hardware one. Study each type to find out which one will be best for you.
Security does not end with crypto wallets. Learn what the best practices are and apply them to all your transactions. Crypto can bring rich rewards, and there are individuals and entities that attempt to steal your personal and financial information.