Deep Dive #1: A framework for picking Coins/Tokens to invest in

A deep dive covering different topics, tools, & information you can use to make more informed crypto investing decisions

This article aims to provide a framework outlining the steps I take when considering whether to invest in a coin or token (specifically fungible tokens). I would advise using this as a framework to develop your own process you use within your strategy or strategies. There is no perfect guide, but hopefully, this will provide you with a strong start. If you have any questions when reading, please comment on the article, and I will be happy to respond. Also, as always, this is not financial advice (Full Disclaimer at the bottom, I include this everywhere : ) )

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Table of Contents

1. General advice to consider before getting started/beyond investing in a single coin

2. Different types of Analysis

3. What's its purpose?

4. Tokenomics 

5. Competition

6. Current Price & Past Performance

7. How can I buy?

8. Who is the team?

9. The Code

10. Helpful Tools & Sites

11. An example of this approach applied using some of the tools mentioned

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General advice to consider before getting started/beyond investing in a single coin

These are some topics I think need to be considered before investing in the crypto space, even though they aren't directly relevant to the buying of an individual project.

• Risk what you can afford: Within Crypto, it's easy to get swept up in the wild percentage increases and the stories of overnight millionaires, but people often forget about all of the investors who risked everything on one coin or token growing overnight but instead lost almost everything. Some investors go a step further and will buy via taking a loan or using leverage, both of which I would recommend against; Crypto swings down just as hard and fast as it swings up. Due to this, before putting any money towards Crypto, you should figure out how much you can afford to risk. Here is a starter answer I have on my FAQ for Etoro that can help you to determine what you can afford to comfortably risk:
  
  

  "I am a pretty strong proponent of the "only invest what you are comfortable with losing" mindset. To figure out your risk tolerance, I would keep in mind where you are at in life in terms of career life cycle & commitments. For me, since I am at the beginning of my career( far from retirement) with low debts(currently have some from college debt) & low commitment (no kids just a dog, and apartment bills) I am comfortable with risking the majority of savings minus enough to pay all bills for the next couple of months (to protect against an emergency situation). I am also comfortable with leaving this money in for 1-5 years till the next bull in the off case we missed this runs top & plan to leave a large amount of my money in here either way. My strategy also keeps between 5% (at the crypto bear market) & 80% (at where I think we are near the peak) to the side as cash which allows me to be more comfortable putting this much funds in. Your comfort level is going to be different than mine though based on the factors above as well as many others so I would recommend looking through your life for similar factors & coming to a decision that matches your life. Hopefully, that helps, and don't feel pressured to put in a ton all at once. There is nothing wrong with Dollar-cost averaging in as you become more comfortable, it is a proven tactic 👍 There are also many waves (Not just Crypto or even this specific crypto bull run), just because you aren’t able to go all-in at this exact moment doesn't mean there won't be more opportunities throughout life to do research and put your money where you think the future is headed. "

  
  
  I would also like to note that I am taking an extremely high-risk approach as I have determined that is what I am currently comfortable with. In the future, as I have more dependencies, I will distribute my net worth across several assets and not just Crypto to protect myself against its high volatility.

• Be cautious of exchanges: When using any exchange (An example of an exchange would be Etoro) make sure to double and triple-check that it is a reputable exchange. There are tons of scams that work by creating fake exchanges to steal your money.

• Consider Taxes: Make sure you understand what the laws are for taxes in your area & how they are affected by how long you hold your investment. Within the US, the time frame you hold the asset affects the rate at which it is taxed.

• Large or small projects: If you want to invest in smaller projects, investing is more challenging than buying larger projects. Larger projects can be purchased on most exchanges, but smaller projects often require you to buy Crypto on a larger exchange and then move it to an external wallet where you can exchange it for the coin or token of your choice. There are also other methods of getting coins/tokens, such as airdrops which I will cover at a high level in this article. I will not do an in-depth breakdown of how to go through the buying process for smaller tokens/coins, but I will in a future article as it's extensive enough to deserve its own. As it’s more work to do this it’s important to keep in mind what you are willing to go through to purchase each project.

• The Macro Crypto Environment: Before buying any projects, consider where we are on the Macroscale for the crypto market. If Bitcoin is near a market cycle top it may drop soon which could bring the Crypto market as a whole down potentially tanking your investment even if it’s a great project. This also applies to when you start investing. Whenever you start investing can have a large impact on your success. Most projects trend up when the market is in a bull run or generally bullish and trend down when it's bearish.

• Don't buy dead projects: When projects are abandoned, they don't disappear and instead just slowly decay in price. This can lead to people accidentally buying projects that have no active development or maintenance and are therefore unlikely to ever give you a return on your investment. Going through the general steps I outline below should protect you from this, but I wanted to add it as an extra caution as no one wants to buy an abandoned project by accident.

• Don't forget the null hypothesis: When considering a project, your hypothesis is that the project will be a good buy which means your goal is to collect enough information to decide whether it is a good buy and to thereby disprove the null hypothesis. In science, you want to find evidence to disprove your null hypothesis (opposite of your hypothesis) as well as to prove your hypothesis because if you can prove both, you likely missed something, and if you can prove one but not the other, then the one not proven is likely incorrect. If you still want to buy the project after trying to convince yourself not to, it’s more likely to be a good buy.

• It's hard to hit anything when your not aiming for anything: When picking a project to invest in, it's important to figure out what type of project you are looking for. This means considering what project would fit into your overall strategy based on what amount of risk you're looking for, what amount of potential profits, which sector it fits in etc.