Nowadays, there is a rapidly growing number of projects, tokens, and platforms in the crypto space, which means that investors are exposed to both massive opportunities and serious risks. This is why Doing Your Own Research (DYOR) is needed. DYOR helps investors dodge common traps like scams and hype-based decisions by enabling them to comprehend fully what they are investing in.
Here’s a practical approach to DYOR to support you make smart and adequate decisions before attempting a crypto project:
Verify the Crypto Project’s Risks and Security
Before investing, evaluate the company’s overall security, whether a reputable firm properly audits it, and whether the developers are known to be transparent. In high-risk areas like decentralized finance (DeFi), where promises of fast bitcoin yield returns are typical, you must first question whether the risk level is worth the reward.
Watch for red flags such as a low-quality whitepaper, assertive promotion, guarantees of massive returns, or a lack of transparency.
Evaluate the Community
An engaged community can indicate a project’s long-term sustainability. Hence, you can enter their forums or social media channels like Telegram and Discord or follow them on different platforms to assess how active and transparent they are. Real communities grow organically, while fake ones rely on bots and paid shilling.
Conduct Fundamental and Technical Analysis
DYOR includes both a macro and micro view of a project. Fundamentally, examine the problem the project solves, its roadmap and long-term vision, use cases, market needs, and partnerships. For trading, technical analysis allows for identifying trends, price charts, or market sentiments.
Review Tokenomics
This specifies how tokens are created, distributed, and used within the ecosystem. You may look at the total supply, incentive structure, utility, or inflation model. Projects with sound tokenomics, like Bitcoin, which has a limited supply, are more likely to retain value and trust over time. Meanwhile, poorly structured token models often crash under pressure.
Consider Personal Factors
Know your financial limits, investment goals, and risk appetite. Even if a project offers impressive and immediate gains, it might not align with your strategy or comfort level. Always ask yourself if you could lose this investment, as insufficient decision-making can lead to costly mistakes.
Remain Informed with Trusted Sources
Use trustworthy sources and other verified crypto media outlets, analysts, and researchers to stay updated as the crypto space changes rapidly. These platforms have credible information that helps separate facts from hype. Avoid making decisions based on unverified sources as well.