The world of cryptocurrencies can be a daunting adventure, and with the inherent risk of capital, figuring out how to tell a good project from a bad one could be the difference between a bumpy ride or a smooth journey.
Here are 10 data points to help you work out whether a project might be worth investing in or should be urgently avoided.
Usefulness – the deciding factor
The usefulness of a crypto project can make the difference between a successful or unsuccessful project run. This is because longevity of value is a crucial factor in determining the likelihood of a cryptocurrency’s survival – because if there is no value, what is the purpose?
Without purpose and value, demand may decline and eventually the project may cease to exist – especially if times get tough and a bear market occurs.
Percentage of tokens for the principal holder: data is your best friend.
This point may seem strange, right? However, it is an important aspect that comes from the ratio of token holdings compared to the ratio of top holders.
So let’s say you find a project where 80% of the tokens are held by the top 100 holders. In this case, there is a high probability that the majority of tokens are held by one team or that whales hold the majority of tokens and can therefore easily manipulate the price development.
Marketing with an eye on the price
Having a project in mind is certainly an important aspect. Quite simply, marketing is necessary in any expansion, whether it is investing, driving engagement or building a community or product. It is often tedious to keep track of or follow up on all the announcements of an upcoming project. Using data aggregators can help you keep up with announcements and changes to projects.
Token distribution: look at the numbers
For a project to gain the trust of potential investors, proper token distribution is essential. Poor token distribution can lead to token concentration, lack of decentralisation, conflicts of interest and lack of liquidity. These problems can significantly undermine the credibility of the project, hinder growth and adoption, and potentially lead to manipulation of the token value.
Tokenomics: Here’s where you need to pay attention
Supply, demand, distribution, longevity – the list goes on. All of these and more can fall into the tokenomics department of a project. They can all play a big role in whether tokenomics signal a good or bad project, because numbers matter, and if they don’t look good in the long run, the chances of a project’s longevity are at stake.
Community is the key
A strong community can be an absolute value-add for almost any project, providing the backbone and the stability, commitment and trust that projects so badly want.
Weak or non-existent communities tend to indicate a lack of trust or interest, which can be a poor indicator of investment. High community interest and growth can increase the mood and positivity within a project, which can lead to a longer life and more added value.
The project team: the “who’s who
Everything is stronger with a team, and this is also true for crypto projects. The team can determine the potential for success. The combination of talent and experience can increase the longevity of a project and also help build trust and collaborative aspects.
Roadmap: For those who like to participate
We all know how important a reliable map can be when you get lost on the road. That would cause problems – especially with trust.
This also applies to the roadmap of crypto projects. If deadlines or promises are not met, it not only affects the investor, but expansion and trust are also lost. Whether a roadmap has been adhered to and goals have been achieved is crucial to whether a crypto project is worth investing in or not.
The number of active addresses in a cryptocurrency project can provide important information. Active addresses represent the number of unique addresses that have sent or received transactions on a particular blockchain network within a certain time frame. The higher the number of active addresses, the stronger the user-related engagement.
A low number of active addresses may indicate a lack of interest or trust, and conversely may indicate a problem in the overall project. This is a credible area to consider when determining whether a project is currently doing well or not so well.
The good old stock market listings
Crypto projects gain traction when they are in the public eye and accessible, and exchange listings do just that. The more exchanges a token is available on, the more likely it is to succeed, for many reasons – access, stability, growth, engagement and more. The greater the number of exchanges, the better. So if you’re looking for signs of whether a project is good or bad, multiple exchanges and their rank can be a better indicator.
Overall, there are many factors to consider when deciding whether a project is good or bad, and these are just 10 data points that we think can help decipher the many decision-making processes and select the projects you value most to put capital into.
When we focus on what separates a good project from a bad one, we have not taken into account the project itself, the unique utilities driven by tokenomics and enforced by smart contracts, and the financial incentives set to attract new holders.