Between the mass amounts of NFTs flooding the market, and the numerous cryptocurrencies available to invest in lies a group of people who are eager to get started in the space, and perhaps benefit from their investments.
However, considering both markets are so new and still very little is known about the longevity of both NFTs and crypto, it can quickly become an overwhelming feat that many donât feel comfortable attempting.
For those who do try, a majority may end up losing money resulting in a tight spot that can be difficult to climb out of. Thatâs why itâs so important to always do your own research (DYOR). But, what is the best way to conduct proper research?
When it comes to doing your own research, there is a lot to take into consideration to ensure you are investing your hard-earned money and time into things that will yield you the best results with the least amount of risk.
Let’s break the research down into two separate categories starting with NFTs.
When you DYOR on which NFT to buy, there are a few things you need to look into. However, before looking into these very important aspects, the first rule should be to find an NFT that you genuinely like. That way regardless of what happens to the value of your NFT, you arenât upset if it drops below what you purchased it for.
Hereâs what to research when attempting to buy a good NFT with long-term value. I like to refer to these as the three Câs. The creator, community, and the contract. Let me explain.
The first task during your NFT research should be to find out who the creator behind the brand is. Generally, a reputable NFT project will have a doxxed creator(s) and be completely transparent with their intentions of the project.
Remember, youâre investing in the person behind the NFT and their ability to execute, not necessarily the NFT itself. So itâs important to understand that the success of any NFT project ultimately depends on the creator’s ability to see it through.
Iâm well aware that the common misconception is to look at a projectâs roadmap to determine if the NFT will be sustainable or not, but in all reality, a roadmap is nothing more than an idea. Anyone can say what theyâre planning to do, but actually executing that plan is what will make or break any NFT project.
An example of a good NFT project is VeeFreinds, a project built around meaningful intellectual property by a successful entrepreneur, businessman, and investor Gary Vaynerchuk. Knowing Garyâs history of building proper brands and businesses, combined with his ability to spot trends far in advance, you can assume Gary may be a good person to invest your money in.
If you find that you canât figure out who the human is behind a project, then itâs best to approach the rest of your NFT research with extreme caution and thoughtfulness. Generally speaking, if a creator behind a project isnât willing to disclose who they are, then itâs likely that the person is not confident in their ability to execute or they have bad intentions.
After determining who the creator is behind an NFT project and if you feel good about them, next you can move on to exploring the community. When researching an NFT projectâs community, make sure to cover all your bases.
Currently, platforms such as Twitter, Discord, Instagram, and YouTube can all be places you may find an NFT community hanging around. A good NFT project will usually have an overall positive outlook on the project, the team, and the future of the brand, all projected by members of the community.
You should always feel free to ask any questions you may have directly aimed at the community, this will not only help you understand the project better but will also give you a better understanding of what kind of people are involved in the community.
A solid community will be happy to answer any questions you might have or at least give you some direction on where to find the answers.
Other signs to watch for when researching any NFT project are how often they post on social media, their interactions with others, and how willing they are to help others.
If a projectâs feed is only full of free giveaways demanding retweets and shares in return, then you may want to think twice about why they are doing this, and what benefits it provides for their brand in the long run. You may find that the only benefit is short-term gains and exposure
If you like what you see in both the creator and community, then you can begin to dig even deeper into the actual utility of the project and what value it provides you through the smart contract.
Itâs fair to say that not every NFT you look into buying will have a smart contract. If you are buying a nice piece of art or a collectible item, you may simply be buying that NFT as a collectible, and thatâs completely fine if thatâs what you want.
However, there are many NFTs that may offer actual utility to collectors, and sometimes that utility will also come with very specific terms and conditions. If you canât find the terms and conditions attached to the NFT itself, then you should be able to view everything included with the purchase of said NFT on the brandâs official website.
If you value everything that the NFT has to offer you as a collector and youâve covered the three Câs extensively, then you should be all set to purchase your NFT.
Buying and investing in Crypto is a similar process to buying good NFTs, but youâre looking for different things. Hereâs how to do your own research on when buying crypto.
Almost all cryptocurrencies should aim to serve a purpose. ETH, for example, exists as a reward for verifying blocks and transactions on the Ethereum blockchain. ETH is a great example of a cryptocurrency with a purpose considering that Ethereum is the most used blockchain for trading NFTs.
Another example of a cryptocurrency that serves a purpose is MANAâa token on the Ethereum blockchain that powers the virtual world of Decentrland. MANA is the native token of Decentrland, allowing users to buy and sell land and other digital assets within the Decentraland economy.
If the crypto youâre looking to invest in doesnât aim to solve a problem or serve a purpose, then you may want to move on.
Once youâve determined that the crypto youâre looking at exists to serve a purpose, next you should figure out how the currency functions and how it will execute its purpose. Thatâs exactly what the whitepaper is for.
The whitepaper is a publicly available document that lays out the goal of the cryptocurrency and how it plans to achieve that goal. When reviewing the whitepaper, it should be made clear exactly how the crypto aims to serve its purpose.
If the whitepaper appears to be poorly written or you simply canât understand its context, then either move on or find someone who can interpret what the whitepaper states. Itâs best not to invest in anything you donât completely understand.
Letâs be honest, any legitimate cryptocurrency project will have members of their team listed publicly as well as any partner organizations who support the development of the project. You may not recognize every single name if any, but you should always do the research to find out who each individual is and what their background is.
A person or companyâs history can tell you a lot about their reputation and what you might expect to see from such people. If you canât find anything about the founders or if they have a poor reputation, this should be a huge red flag.
Now that youâve taken into consideration everything a cryptocurrency has to offer and aims to achieve, you can make an educated decision on the overall sustainability of the crypto.
Ultimately, cryptocurrency worth investing in should provide some sort of value or aim to solve a problem that the creator of the currency has deemed an issue.
If you come to the conclusion that what the creators have determined to be a problem actually is an issue, and their plan of action using the cryptocurrency to solve that problem seems reasonable, then you may decide to invest some of your own money into it in hopes of a return on your investment.
One of the lowest risk investment strategies for investing in cryptocurrency is the dollar-cost averaging method. Dollar-cost averaging is a strategy that many investors have used, and continue to use, due to its low risk and a high potential for substantial gains.
Overall, when doing your own research there are some best practices that you may want to follow to minimize your risk when investing. Here are some simple points to consider:
1. Never spend more money than you can afford to lose. Investing smaller amounts over a longer period of time will decrease risk, but not necessarily your gains.
2. Patience is key when it comes to doing your own research. Even if you see the floor of an NFT project steadily rising, or a cryptocurrency blasting off, itâs always best to make sure you do thorough research before committing to anything.
Gary Vee recommends at least 50 hours of research before pulling the trigger on any NFT, but this holds true for any investment you may be considering.
3. Donât take anyone elseâs word. Itâs one thing if someone tells you to look into something, but to blindly invest your money into something you donât completely understand is a huge risk. Just because someone whoâs very knowledgeable in the space, or an influencer is buying into something doesnât mean it’s a good investment.
Take everything with a grain of salt and always DYOR to come to your own conclusion.
4. Join a community. If you can find a good community that is talking about the project, youâre more likely to come up with additional questions, seek more answers, and gain more knowledge. Any insight that you can get on a project is good, so seek out others who are talking about it as well.
5. Avoid falling victim to fear of missing out, better known as FOMO in the crypto community. FOMO can be brought on by a number of things such as hype induced by influencers and groups of people, limited quantities, and pumping floor prices.
If you see this, just be aware that these are tactics used to induce fear into the market so people buy without giving much thought to what theyâre actually buying.
The moral of this article is to always do your own research in order to come to your own conclusions, regardless of the circumstances. If you make sure to do your own research every time youâre considering investing in crypto and NFTs, then youâre more likely to invest in the right things, and reduce your overall risk of investing in a bad project.
So what will it be? Will you take the time to do the research? Or are you going to risk it all and blindly invest your hard-earned money? The choice is yours.