Learn more about how to choose the right cryptos - including reading whitepapers, financials, partnerships, and social media!

Choosing which cryptocurrencies you want to invest in can be a daunting task - especially given that there are now over 12,000 cryptocurrencies in circulation! By the end of 2021, over 1,000 new cryptos were being introduced every month. This figure is a cause for concern, given that A) anyone can create their own tokens and B) most new developers are in it these days to make quick money, rather than provide real-world value.

One such common scam is a rug-pull, where the creators of a project convince investors to buy in - sending their token to astronomical heights! Then, the creators exit the project and take funds in any number of ways, causing the market to crash.

Fortunately, we're going to train you to become an expert in spotting worthwhile projects from the money-sinks and downright scams! Let's begin.

Where can I view all available cryptocurrencies?

The two most popular sites to view cryptocurrencies are Coinmarketcap and Coingecko. All major projects worth noting will be listed here, as well as thousands of smaller projects. However, keep in mind that crypto projects will only be listed if they have applied for it!

If you're a fan of very early stage projects, it's quite a bit more difficult to catch wind of news - but you can try subscribing to newsletters, Reddit subthreads, crypto enthusiast forums, Telegram, and Discord to see if there are "whispers" of an upcoming coin.

Both Coinmarketcap and Coingecko have several features that make it easy for you to discover new potential investments:

• The "Recently Added" tab lets you see which cryptos have been added in the last 30 days - along with useful performance indicators like the market cap, volume, and percentage increase/decrease over time.
• You can also view "Trending" and "Gainers and Losers" to see what's hot, and which cryptos have produced the most volatile gains and losses in that day.
• Coingecko has an interesting feature where they introduce sentiment to the equation. Sentiment refers to how the public feels about a cryptocurrency. The "Most Voted Coins" and "Positive Sentiment" lists are an example of this.

Finally, if you are an investor who likes to stack their portfolio by sectors rather than individual cryptos - the "Categories" tab will let you view groupings of coins that match a certain purpose or ecosystem. For example, BNB Chain Ecosystem, DeFi, GameFi, Metaverse, and Privacy Coins are all examples of categories.

Early considerations…

Before you get too excited and dive deep into white papers and analytical charts, ask yourself these questions about the crypto(s) you've selected:

• Which exchanges can I buy this cryptocurrency on?
• Of those exchanges, are there any legally authorized to operate in my country?
• Is it legal to buy this specific cryptocurrency in my country?
• Would purchasing this crypto impose any unreasonably difficult burden or fee?

If the answer to all of these questions is positive, you're ready to dig deeper!

What is a whitepaper?

A crypto whitepaper is a document released by developers that explains the technology and purpose of the project they are working on. Every prospective investor should read a project's whitepaper, which can usually be found on their dedicated website. The goal of the whitepaper is to convince people to invest, so you will usually see a whitepaper appear around the time of the project's initial coin offering (ICO).

Here are the main components to look for in a whitepaper:

• The problem and solution statement should fully describe the product, and a detailed market analysis as to why this product fits. Don't be fooled by a barrage of charts and graphs - the best statements are simple and should make sense. If this product does not solve anything, it is worthless! Likewise, do your own research to make sure that the problem actually exists.
• There should be a section that gives information about the proposed token distribution for the ICO - explaining the value of each token, how many will be in circulation, and the allocation of tokens between the team and other investors. Another thing to look out for is the mechanism of token redemption, and a failure plan in the event this ICO doesn't reach its funding targets. Be wary of projects where the team holds far too many tokens in proportion to investors - or projects with no lock-up agreements. Without this, the project can easily become a rug pull.
• It's painful, but there will be a technical section that goes in-depth into the technology behind the project. If you're unsure about the jargon here, consult a friend or send a message to the team to get clarification.
• The project roadmap should spell out the development plan over the next few months to a year - and define when token sales will start.
• Finally, arguably the most important section will be about the team and advisors. Who are these guys? What past projects were they involved in, and what was the outcome? Are there any pattern affiliations with less-than-savory projects? Search on LinkedIn; search for mentions of them on forums and how many people follow them. If you find any personal profiles - dig around and see how long that profile was created, if there are decent photos to identify them by, and how often they're interacting. One sign of a rug-pull project is a large number of ghost profiles that look mostly empty.

What other criteria should I base my decision on?

Assuming the whitepaper checks out, the future success of a crypto project is determined by its financials, funding & partnerships, and social media presence. The first measure of financial health is market capitalization. A high market capitalization in the billions means that people really trust and buy this crypto - even if they shouldn't. Ironically, some untrustworthy or spoof projects (called memecoins or shitcoins) have catapulted themselves into fairly dominant positions and stabilized as a result.

Large-cap coins have a value of more than 10 billion dollars; mid-caps have a value between 1-10 billion, and small caps have a value of less than 1 billion dollars. A general rule of thumb for inexperienced investors is to avoid small caps and microprojects - though a few of these have the potential to explode 100-1000x in value.

Trading volume is the next big consideration - you'll want to be able to get in and get out of your investment quickly if things go wrong. It's not just about your crypto's total trading volume; make sure the exchange you're using has decent liquidity on that asset!

Next, you'll want to look at token performance relative to its inception, and any recent all-time highs. Has the value dropped much lower from when it was launched? Is the current downtrend deceptive, because the overall trend over the last 5 years brought about a 900% return? You need to pay careful attention to these things and not readily assume patterns.

Every project should be backed by ample funding, and have a strong web of partnerships and other crypto projects in their ecosystem. An ecosystem is a network of participants on the same blockchain that share similar business objectives and processes. More often than not, their technology allows them to work seamlessly with each other and become more competitive as a collective rather than an individual project.

The final aspect of a good project is their social media presence and marketing. After all, what is a great product if no one has ever heard of it? Check for their engagement on Twitter, Facebook, Telegram, and other groups. Understand what the general sentiment is. What makes people excited about this project? What reservations do they have? Lunarcrush is an excellent platform for researching this.

The Takeaway:

Performing due diligence on your crypto can be labor-intensive, but you'll pat yourself on the back once you're done! Here at Finblox, we take away the guesswork by choosing only the most rock-solid assets and offering outstanding but predictable returns on your investments.

Why not let us know some of your favorite cryptos? Take a look at our website and leave some feedback if you want us to add more assets!

Thanks for reading! Please subscribe if you haven't already, and stay tuned for our next course on an elusive topic - tokenomics.

This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. Charts, graphs and references to any digital assets are for informational and illustrative purposes only.