How To Analyze Crypto Tokens Correctly?

Before starting investing in any crypto assets, you need to be educated well. Otherwise, any crypto investor will be doomed to failure and some losses.

In this article, we have compiled a list of several ways to help you properly analyze crypto tokens — whether it be a utility token or an asset token — to make a safe choice.

Study a White Paper

Start any cryptocurrency or blockchain investment solution by carefully reading the white paper.

This official document must be detailed. The great advantage is that you can find out if the company has a well-thought-out implementation plan.  Also, check if there are any additional resources in a white paper. It can be financial models, SWOT analysis, and some legal issues. You will also be able to determine the suitability of tokens for standardized mass trading.

Check the white paper for this information:

  • What is the unique selling proposition of the project compared to others?
  • What is the methodology of project managers? How do they plan to be successful on the market?
  • What steps will the company take to achieve its goals?
  • What are the use cases for the token?

You must make sure that everything is perfectly checked before investing in crypto tokens. Generally, you should be suspicious of a company that does not have an official document. Be persistent and make sure to confirm that the company has a true white paper.

Define Tokens’ Purpose

There are a lot of cryptos on the market. Each cryptocurrency has its own purpose and it differs from others.

Tokens’ purpose must correspond to your investment goals. Make a research on this topic before starting your investment steps.

Research How Secure the Coin Is

Everybody concerns about security when it comes to cryptocurrency. 

Crypto transactions are often described as anonymous and ultra-secure, as participants are not required to provide their real names, bank account details, or other information that cybercriminals often seek to gain access to.

Ethereum and Bitcoin still store transaction data permanently on the network so that truly sophisticated gangs of cybercriminals can hack it in order to trace the identities of the participants. There are exceptions to this rule, such as Monero, which uses extremely complex forms of encryption such as hidden addresses and ring signatures, making it one of the truly anonymous cryptocurrencies.

Blockchains are used to record cryptocurrency transactions and offer real security benefits. However, cryptocurrency exchanges have proven to be vulnerable to hackers, which means the cryptocurrency offers no security guarantees.

Do a thorough background check on the crypto token you want to invest in and the technology it is based on.

Watch Tokens’ Sales

Crowdfunding with all ICOs is done through a token or currency system.

Watch the progress of token sales over time.

Some companies have made it easier for investors to monitor their sales by letting you take a look at their system. This helps to gain the trust of potential investors.

Cloud business models are becoming popular nowadays. which is why the popularity of blockchain as a service is also growing. This helps to increase the transparency of the cryptocurrency landscape.

If a company does not allow you to monitor the progress of their ICO sales, consider this as a red flag. Before you do anything, do thorough research about it.

Find out Which Particular Problem Token Is Responsible for

The crypto token you want to invest in should solve a specific and unique problem. This ensures that your investment pays off in the long term.

That’s why before investing in any crypto, you need to find out if the token solves a specific serious problem.

Check out the Different Token Laws

You should definitely read the legislation carefully. Some countries have strict laws governing participation in the purchase and sale of tokens.

It may turn out that, according to the specific laws of your country, you will be prohibited from participating in investing in a specific cryptocurrency. Legal issues are important to settle before investing in a particular token.

Final Thoughts

Insufficient research can lead you to make an uninformed investment decision which will lead to huge losses in the long run.

Cryptocurrency and the ICO ecosystem can provide you with tons of investment opportunities but you should take your time on deep research in return. It will pay off afterward without great losses due to a lack of financial literacy. 

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