Trading often needs to be accompanied by fundamental analysis of a crypto project. That is why it is essential to do your research before investing for the long term. Let’s see together the steps to follow.
Knowing how to synthesize information from a white paper is essential.
As a long-term investor, you need to understand the mechanics of the project and especially the environment in which it operates.
Upstream, it is suggested to do a market study to identify the competition.
Once you have researched the key players in the market, the competitive advantage of your chosen project should be apparent.
In a white paper you will find the entire roadmap of the project planned over several years.
A well detailed roadmap, preferably with a 2 or 3 year visibility, is a positive point.
On the other hand, an overly ambitious roadmap can do the project a disservice.
It is essential to ask the right questions:
What is the role of their token? Does the token have a use?
In this case, the token must have several functionalities.
For example, the token in question can be used to pay transaction fees or can be used on marketplaces to purchase NFTs.
Also, we often come across the case of the governance token.
In this context, the holders of the latter will have the right to vote for the measures concerning the development of the project.
The tokenomic analysis of a crypto project
One part that requires further consideration is the tokenomics of a crypto project.
Interpreting a token distribution is a step that should not be underestimated.
This includes understanding token distribution and dilution. Every investor must be able to know who owns the tokens and on what time scale.
By definition, dilution is an introduction of tokens into the loop over time.
In general, each project distributes a small part of the available tokens, in order to maintain price stability.
Over time, more and more tokens are released and affect the token price.
In parallel, the capitalization of the crypto project must increase to maintain the price of the token.
Here’s why you need to keep an eye on the dilution schedule before settling on a value:
In the case of the Aury crypto project, we observe that major players such as the team, private investors and the ecosystem own more than 75% of the tokens.
This distribution must be homogenous among each actor to ensure a viable and healthy token economy.
As soon as the tokens are released for each holder, strong movements can be observed in the market.
Therefore, the price of the token will tend to go down as releases usually take place gradually.
This is why it is imperative to look at the post-diluted valuation, i.e. the capitalization achieved after all tokens have been released:
You still have the step to appreciate the project by delving into some research:
- Is their product already up and running?
- Does the project generate profits?
If all signals are green, the token price has a chance to beat inflation and hold its course.
In fact, analyzing a tokenomic will help you anticipate future movements.
Join the community of a crypto project
Other alternatives are possible to save time in your search.
That of joining a group specialized in a cryptocurrency, or a more generalist group such as the community The diggers
The Discord and Telegram apps are filled with educational groups of all kinds.
Large projects that have been around for several years have active and engaged communities at the heart of the project.
This way you can find white paper translations, project explanations simplified and accessible to all.
There is an exponential flow of information circulating in the cryptocurrency ecosystem 24/7.
Indeed, it is unthinkable that one person covers all the news.
For this reason, joining a community allows you to surround yourself with enthusiasts who will be kind enough to help you in your research.
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