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How to Evaluate a Crypto Project

Not all crypto projects are reliable – unfortunately.

As we all know, the crypto space is not only about inclusivity and opportunities but also a place where scammers can develop their projects by profiting from anonymity.

So, it is crucial to know that some parameters can help you to spot possible scams and evaluate whether the project is worth investing in or not.

It is easy to understand why many users, especially those new to the crypto space, can find it hard to navigate and explore new projects. Fortunately, there are some aspects you can evaluate that will tell you whether the project is reliable or not. Of course, these methods are not foolproof. But it is pivotal for you to filter crypto projects and make informed decisions before investing. 

Starting from a Fundamental Analysis 

The difference between fundamental and technical analysis is that the former is not strictly related to prices. So, it can be helpful to start from the elements that allow you to understand the reliability of a project without necessarily staring at hundreds of charts. 

These are the elements you can evaluate first: 

  • Whitepaper: The whitepaper is the first document you should read before investing. It tells you all the technical aspects of the project, its scope, the mission and vision, and how the project involves the community of crypto investors. A whitepaper should be informational, accurate, and easily accessible. A whitepaper that does not meet these conditions could be a red flag.
  • Team: The team behind the project is equally important. While it does not have to consist of crypto experts, core team members should have public profiles on professional networks that help prove their experience in the field – not necessarily as developers but also as marketers, traders, investors, or entrepreneurs.
  • Website: The project’s website should contain all the relevant information, information about the team, an easy-to-find link to the whitepaper, the roadmap of the projects, and so on. It should be without typos – this might seem obvious, but in reality, many scam projects have websites full of mistakes. Because these websites are often created by bots and automation tools, allowing knowledgeable visitors to spot the scam at a glance.
  • Roadmap and Vision: A reliable crypto project should have goals, strategies to reach them, deadlines, and general scope. In this case, the project you choose should clearly show its roadmap and vision on the project’s website, allowing visitors and investors to evaluate a possible investment better.
  • Investors: A crypto project should consider both retail traders and institutional investors, especially because, as we will see later, institutional investors usually allow for higher liquidity, which is a pro for any asset.
  • Social Media: The stronger the community around a crypto project, the better – it is more probable that the project will have a long life and not lack liquidity. Social media platforms are a good indicator – they are public, allow for discussions and comments, and can be used to measure the opinion of those already involved in the project or to spot any problem. Reddit, Twitter, and Telegram are common social media used by crypto professionals. 

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Helpful Data to Start a Technical Analysis

Once you filter crypto projects by conducting fundamental analysis, you might want to understand more about the price of the token that fuels that crypto project. In fact, if you find a project you are interested in, there are many useful technical indicators to determine the best timing to invest and understand whether that project is really worth your attention or not.

Here are some data that influence or are strictly related to prices: 

  • Circulating Supply vs. Total Supply: Circulating supply represents the number of tokens currently circulating in the crypto market, while the total supply is the total amount created. If you notice that a project is reliable enough and likely to succeed in the long run and has a low circulating supply of tokens, it could mean that the price of the project’s token can further increase. This is especially applicable when the project sets a maximum supply. The reason why this happens is straightforward — if the supply of the token is limited and as the circulating supply gets closer to its total supply, inflation would decrease, which should increase the token value.
  • Market Capitalization: Often known as market cap, this indicator is the product between the price of a token and its circulating supply. Usually, large-cap projects are considered less risky, but you should also consider the level of circulating supply before making your evaluations. 
  • Price History: The longer the history of a project, the better – in fact, the more data you have to analyze, the more accurate your analysis and predictions can be. That is why most traders, especially when they still have less experience in the crypto field, try to avoid new projects and only focus on those that have at least a couple of years of history. 
  • Trading Volume and Liquidity: Trading volume is among the most important technical indicators – especially because it’s an objective measure. Let’s define volume as the sum of trades in a given time and liquidity as how easy it is for a trader to find a counterpart to buy or sell an asset at a specific price. Higher volume improves liquidity, and both influence the market making it more stable – in fact, unusual spikes are less frequent since it is harder for single traders and investors to influence the market. Once again, this makes your predictions more reliable. As in a virtuous circle, more stability attracts more institutional investors, and more institutional investors increase volume and liquidity, making the market more stable.

To sum up, a crypto project with tokenomics that can favor long-term stability and attract more institutional investors has a higher probability of being profitable in the long run. 

Final Thoughts

Next time before investing in any crypto projects, you can try conducting both fundamental and technical analyses. It will help you understand why you are buying the token and supporting the project. It is common in the crypto space for people to shill, where they’d advertise their coins and hope that the price of the token would go up. Sybil attack is another example of how investors get tricked into buying. Therefore, that’s why it is crucial to keep skeptical and always DYOR (do your own research) before making any crypto investments. 

Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of TheCryptoArea. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.



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