How to Do Your Own Research (DYOR) on any Crypto: A Comprehensive Guide to Making Informed Investment Decisions

Welcome to Xclusive Tech, your go-to source for tech education and trends. Here we explain topics of technologies and trends using analogies, stories, and examples so that even your grandpa could understand them. In this article, we'll delve into the intricate world of cryptocurrency research, demystifying the process and providing practical insights to empower you in making informed investment decisions. While this article isn't financial advice, it aims to guide you through the essential aspects of conducting thorough research in the crypto space. If you've ever read any cryptocurrency article, or watch any video on cryptocurrency, you'll notice the creators of the article, or video say, this is not financial advice, always do your own research. Like it's some magical spell that protects them from getting sued, but technically offers you no credible information. What does doing your own research really mean? What does it actually look like? Is it difficult? I'm going to be answering all of these soon.

In this article, I'm going to be explaining what doing your own research really means, and most importantly, how to actually do it. Now, before we get too much into the important stuff, I want to introduce to you an analogy that will help you understand the types of research that people do. You know if you want to lose weight, there are a lot of factors that play into your success, right? Some people say that you simply just need to get more exercise. Others say it's the type of exercise that you do, whether weightlifting or cardio. Others say the only thing that truly matters is your diet. In reality, it's probably a collection of the amount of exercise you get, the type of exercise you get, your diet, your sleep cycle, your emotional life, which affects your hormones, and even your motivation for trying to lose weight, which will keep you going on the days that you don't feel like continuing.

My point is that when it comes to losing weight, a lot of factors are important and probably responsible for your results. Well, the same is true in making a profitable investment. In basic research, there are three types of analysis we can do, and many people claim that only one matters, but I have a feeling that you're going to agree with me that they all matter.

1. Technical Analysis:

Technical analysis is the study of a past price of an asset, and we'll get to this a little bit at the end of the article, but it's mostly looking at charts and making educated guesses based on how other people will make their educated guesses, which then produce certain patterns. Again, you can't really make a great decision by only looking at charts, but they can definitely be helpful. In summary, technical analysis involves the following:

- Examining past price movements using charts.

- Recognizing patterns and making educated predictions.

- Acknowledging its limitations but recognizing its value in decision-making.

The second type of analysis is called sentimental analysis. Sentimental analysis sounds really complicated, but it's basically the study of what everyone is feeling about a stock or a crypto. We can't really measure what people are feeling directly, but what we can do is look at the words that they use on the internet. You can sum this up by asking, what is the market saying? Or even, what are crypto influencer saying about a project? Now, there are lots of advanced tools out there that look at conversations and news articles all around the web, compile them together, and then come up with something called a sentiment score that tells you if people are saying good things or bad things about the project. But again, this can of be easily manipulated, usually isn't long-term in nature, and it's kind of difficult to analyze. In summary, sentimental analysis involves the following:

- Assessing the mood of the market through online discussions.

- Utilizing sentiment scores derived from conversations and news articles.

- Acknowledging its potential manipulation and short-term nature.

The third type of research is called fundamental analysis, and this is the study of the actual ideas, the team, and the progress of a specific project. This is what we will focus on in this article. Since many people think technical analysis is bogus, many people don't have the knowledge to perform sentimental analysis, but anyone can do fundamental analysis fairly easily. Hopefully, if you get one thing out of this article, you realize the world is not black or white.

- Focusing on a project's ideas, team, and progress.

- Emphasizing its accessibility and significance in decision-making.

- Rejecting the idea of a black-and-white choice between technical and fundamental analysis.

1. Reading Whitepaper

A great source of fundamental analysis is simply to read the project's white paper. A white paper is an official paper where the developers describe a problem that they want to solve, how they want to solve it, and why they are going to do it.

2. Researching Tokenomics:

Tokenomics is a fancy word for saying economics of an asset, Token or coin. For early coins, there isn't much long-term data, so the initial tokenomics is a great source of information. Many times you can view the tokenomics on a project's website or their white paper, and I actually have a article coming up soon on how to actually read a white paper. The first thing to find out about a coin is if it is inflationary or deflationary.

- Inflationary vs. Deflationary tokens.

Inflationary simply means that the coin will continue to be created. Inflationary assets usually decrease in price as time goes on if nobody else continues buying, so unless there is a reason to keep buying, the price will go down. For example, the US dollar is inflationary, they keep printing more dollars, and every year it's worth less, meaning it takes more and more dollars to buy the same thing.

Some tokens are actually a mix of these. For example, Bitcoin is actually inflationary right now because miners will keep mining more coins. One day though, there won't be any more coins to mint, and when that happens, it'll stop being inflationary.

Now we can reasonably assume that since some people will lose their keys, forget their private keys, or send their Bitcoins to an address that nobody can access, eventually Bitcoin will become deflationary.

To incentivize users to invest in their tokens, a developer will simply create a new token, give it some arbitrary value, and then create even more of these tokens, making them highly inflationary to give back to early investors.

3. Examining pre-sale data

Some tokens are sold to private investors, others are given out to early users, and some are mined by a closed group set of miners. Basically, what you need to do is find out how does the token initially get out to the public. Each of these launch mechanisms affect the overall tokenomics.

4. Understanding airdrops and their implications.

Many tokens are given to their users through something called an airdrop. Airdrops are interesting because depending on the project and the long-term vision, they could be good or bad. For example, Uniswap was an airdrop. People who received that airdrop and didn't sell now have over $10,000 worth of Uniswap tokens. Another airdrop was the Good Bridging token that was given to people who used the Ethereum to Avalanche blockchain bridge. Now, this token doesn't really have a utility, and a lot of people who got it weren't even sure what it was. I personally received this airdrop and sold it for over $1,000.

Another airdrop was Ethereum Name Service. Now, this airdrop was worth anywhere from $2,000 to $20,000 depending on your interaction with the platform. After 2 days, the price went from $25 to $80, and then fell to around $60 for a while. Like I mentioned in the earlier, there are many other ways to release a coin, including an ICO, a pre-mine, a pre-sale, and even more newer algorithmic ways to offer coins to the public. But it's time for us to move on now.

5. Team Evaluation

6. Social Media

Challenge yourself to view investments critically. Instead of aiming to justify an investment, strive to find reasons against it. By adopting a skeptical approach, you increase the likelihood of making well-informed decisions. So the goal of research is to try to make an investment look bad. Now, this might seem counterintuitive, but humans are very biased. Anyone can make an investment look good. It takes a lot more effort to make an investment look bad, and that's exactly what we want to do. The goal of making an investment should be to make the project look bad. Now, like I said, any project can look good, especially if it contains a new and unique idea. To facilitate this approach you need to ask yourself the following questions below.

1. Will other people buy this coin or token?

Most of these projects do not have profit-generating mechanisms, meaning that most will only be profitable if other people buy the coin or token. Ask yourself, can I see a million other people finding out about this coin and then buying it too? And if the answer is yes, you're probably staring at a very profitable project. Just like to get those six-pack abs, you need to eat well and put in hours at the gym, if you want to consistently make good investment decisions, you'll need to put in the time and work of doing research.

2. What problem does the project solve?

The next thing I want to teach you is to ask this most important question, what problem are they solving? Even better, how are they going to use your money to solve that problem? In the case of Bitcoin, it simply solves inflation.

Now people ask me all the time, why Bitcoin, and why not some other ERC20 token, or a fork of Bitcoin? Well, Bitcoin was the first. When I talk about cryptocurrencies to anyone, 90% of them have heard about Bitcoin, and that is why it may be the best solution for inflation, even if other coins can solve it. It's just the most well known.

To use another example, Ethereum solves the problem of expensive and slow banks. Ethereum actually solves many different problems, but the existence of banks seems to be the main one. You can't be over-leveraged with Ethereum. You also can't be in the hole, or basically have a negative account balance. With Ethereum you can send money very quickly, and it may not be that cheap right now, but if you're moving anything over 7 figures, it's considerably cheaper than a bank. Also, nobody asks you questions about you moving money, you can do it anonymously and privately.

Ethereum solves a lot of different problems, and it's similar to Bitcoin in the fact that it's kind of the first of its kind, and a well-known project.

One more example, Chainlink gives blockchains off-chain information. With the growing space of blockchain technology, developers are really struggling with getting real-world data onto the blockchain in a reliable and trustless manner.

Chainlink seems to offer a solution to that. Now, in the grand scheme of things, take a step back and ask yourself, what problem is a project solving? Even Olympus DAO, which is something I personally think is quite overvalued, solves a specific problem of a digital reserve currency, and also a protocol-owned liquidity. Wrapping this up, there are some problems out there you may not be aware of, or others you may not even understand.

3. Deserving Factor

For most people, white papers are usually pretty complicated, but I honestly believe anyone can read Bitcoin's white paper. let's get into another big question, of where does it deserve to be?. I like to think of this as its deserving factor. Considering the position a project deserves in the market, leading to a more accurate price prediction. So, does Polkadot really deserve to be the number one cryptocurrency? Does Bitcoin deserve to be number 92? By thinking about this in generalities, we can more accurately make a prediction where a coin might be by our previous knowledge of it. Avalanche might not deserve to be coin number 1, but I don't think it should be number 1000 either, so maybe 20-30 is a fair guess. Using these guesses, we can then divide the market cap by the total distribution of coins to get a fair idea of a fair price.

Conclusion

While this article provides valuable insights into cryptocurrency research, it is not financial advice. The journey to becoming a proficient investor requires time, effort, and continuous learning. If you're keen on exploring more advanced research techniques, here at Xclusive Crypto Club, we offer an extensive guide. Happy researching, and may your investments be informed and prosperous.