Do Your Own Research (DYOR) for Cryptocurrency Purchases | by Stephen Dalton | Aug, 2022

You hear it all the time, “do your own research.” But what do you research? With cryptocurrency, what’s most essential to research is who’s behind the coin, tokenomics, the plan or roadmap, and the potential for passive income

Discover the Five Ws and an H of Cryptocurrency DYOR — Photo 49285725 Alexei Novikov — Dreamstime.

Of course, everyone wants to be the next crypto millionaire, but the reality is that it usually won’t happen if you only listen to the hype and buy when everyone is talking about a specific coin.

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” — Warren Buffett.

Every good journalist or researcher knows the five “Ws” and an “H.” Who, what, when, where, why, and how. It’s fundamental to every subject we research.

Most crypto millionaires bought during a bear market or when a coin was first released and waited for a bull run or a specific event that drove the price up. Although it’s not always necessary to get it during the initial coin offering (ICO).

Everyone is trying to buy when there’s a lot of hype about a coin, so you might get in when it’s at its all-time high (ATH), and then the “whales,” who probably created much of the hype in the first place, sell.

“A cryptocurrency whale more commonly called a ‘crypto whale’ or just a ‘whale,’ is a cryptocurrency community term that refers to individuals or entities that hold large amounts of cryptocurrency. Whales hold enough cryptocurrency that they have the potential to manipulate currency valuations.”Investopedia.

When I first started investing in cryptocurrencies, I bought what everyone was hyping on their podcast and YouTube videos and couldn’t understand why the price of all my coins soon faded after I bought them.

It was mostly because they were new listings on the exchange I use, Binance International. Now, I use other exchanges and move them to my “cold wallet” immediately.

Who — Who Are the People Behind the Cryptocurrency

Although it’s not essential to know who the founders or creators of a cryptocurrency is, if the other fundamentals are sound, it could make a difference long term. Likewise, if the founders have a good reputation, there is less likelihood of a “rug pull.

Some people are better informed about cryptocurrency and apply that knowledge to improve their coins.

Developers like Vitalik Buterin and Charles Hoskinson are considered by most crypto enthusiasts to be experts — some might even say “geniuses.” Both Buterin and Hosk were co-founders of Ethereum, a coin with a market cap of $181,755,507,114.

An interviewer asked Hosk why he claimed to be Satoshi Nakamoto, the Bitcoin creator. This was his reply.

However, the global community is much more vital than the creators. If there’s no community behind the project, it could falter. You don’t have to listen to the hype, but if your crypto choice is to be successful, there must be a community of supporters.

What — What Problem or Issue Does It Solve

Many see an issue with a coin and attempt to “fix it” by creating another cryptocurrency that solves the issue.

Perhaps, Hoskinson looked at the proof-of-work (PoW) consensus mechanism used by Ethereum that made “gas fees” high and transaction speeds slow, then created ADA to fix it.

IMHO, no cryptocurrency is better defined than Cardano (ADA). Charles Hoskinson, the coin’s founder, has laid it all out and is carrying out the plan.

The best way to find out about a coin’s roadmap is by reading the white paper.

Every coin or token should have a white paper. If there isn’t a white paper, that should raise a red flag.

IOHK | Cardano whiteboard; overview with Charles Hoskinson

“Cardano is a groundbreaking proof-of-stake blockchain network, being developed into a decentralized application (DApp) development platform with a multi-asset ledger and verifiable smart contracts. Built with the rigor of high-assurance formal development methods, Cardano aims to achieve the scalability, interoperability, and sustainability needed for real-world applications. Cardano is designed to be the platform of choice for the large-scale, mission-critical DApps that will underpin the economy of the future.”Cardano Roadmap.

There are five phases:

1. Byron — Foundation.

2. Shelley — Decentralization.

3. Gugeon — Smart Contracts.

4. Basho — Scaling.

5. Voltaire — Governance.

When — When Is the Best Time to Buy or Sell

What is the next big event that could attract investors? For instance, the next big move for Ethereum is the Merge scheduled for 15 and 16 September. For LUNC, it’s the implementation of Version 5.22, which will enable the 1.2% burn. Staking with LUNC has already been implemented.

The Best Ethereum Merge Explainer You’ll Ever See

1.2% Burn Tax!!! #LUNC Will Burn 99% Faster Than You Think

Where — Where Can You Buy the Coin

Which exchanges have already listed the coin is vital. If one of the more prominent exchanges has not listed the coin, you’re interested in, that could make a significant difference in its price.

Likewise, when major exchanges such as Binance, FTX, Coinbase, and others list a coin, it could temporarily drive up the price. That might signal that it is time to buy. After it is listed, you should watch for the best time to sell if you are selling.

Knowing when these events will occur could provide a buy or sell opportunity.

Why — Tokenomics Could Answer the Question Why Buy an Altcoin

An altcoins’ tokenomics are an essential factor that drives the price. There are three things to consider:

1. Circulating supply — the number of coins in circulation.

2. Total supply — the number of coins in circulation, plus the number of coins held in reserve or lockup.

3. Maximum supply — is the maximum number of coins that will be produced. For instance, Bitcoin has a max supply of 21,000,000 coins. This number is finite — once those are mined, there will be no more. However, some coins have an infinite amount.

These numbers can affect the price because the smaller number of coins makes the price more volatile. Stablecoins, for example, have a large maximum number of coins so that the price is more “stable.”

However, as we discovered with US Terra (UST), it wasn’t stable, nor was the price properly “pegged” to the fiat currency.

How — How Does the Coin Reward Miners, Stakers, Etc.

Passive income could be a determining factor as to whether you should sell or keep an altcoin. If the coin you are considering selling is making 20% or more staking, why would you want to sell it? You could be making more money holding it than by selling it.

What Is Your Entry & Exit Strategy?

What is your plan for the coin? As stated above, if you can make a significant amount staking the coin, you might not want to sell it. However, if you foresee or hear rumors of an issue, you might want to sell and convert your money to USDT so that you can buy back in when it nears your re-entry level.

You should probably not wait for it to reach an ideal “bottom.” Unless you have a crystal ball, you likely won’t know when that is.

On the other hand, if your exit strategy includes a down payment on a new home, car, or business or the full price, when it reaches a price where you would have enough, that could be your signal to sell.

Stick to your plan or strategy but don’t be stubborn about it. Goals should be flexible enough, so you don’t lose a million waiting for another five cents per coin to achieve your goal.

A variable of a few cents will probably not prevent you from becoming the next crypto millionaire. I’d rather take the $950,000 than wait for the title millionaire and have the price drop.

As many crypto enthusiasts know, Bitcoin lost nearly $10,000 in price in one day.

DISCLAIMER: This article is for entertainment and informational purposes only. It should not be considered financial or legal advice. Not all information will be accurate. I am not a financial adviser, and you should consider anything I write as informational and friendly banter to show you what is possible if you invest your money in these vehicles. However, there are no guarantees. Consult a financial professional before making any significant financial decisions.

Note: This post contains affiliate links. Read my disclosure statement for additional information.

About the Author Photo by Jean Springs from Pexels.

Stephen Dalton is a retired US Army First Sergeant with a degree in journalism from the University of Maryland and a Certified US English Chicago Manual of Style Editor. Also, a Top Writer in Nutrition, Investing, Travel, Fiction, Transportation, VR, NFL, Design, Creativity, and Short Story.

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