At its core, cryptocurrencies are just businesses (most of them)
Before you invest in a crypto token, you must understand the business behind it.
Here are 6 ways to analyse the business behind a cryptocurrency.
1) Problem
The biggest problem with Web3 right now is there are too many solutions chasing only a few problems.
Before you invest, ask these questions:
- Is this problem worth solving?
- Will people spend money on this solution?
- Does this solution need the blockchain?
It makes no sense to have a T-shirt printing company on the blockchain.
2) USP
If a crypto project is offering the same solution as other companies, users have no incentive to switch.
Identify the unique selling proposition of your project.
Is this USP unique enough?
If a blockchain’s USP is transaction speed only, it’s not unique enough.
When a faster blockchain comes across, these projects will struggle to make it.
3) Team
When looking at a founding team, ask these questions:
Are they willing to pivot their product according to evolving market conditions?
Do they have experience in building successful businesses?
Do they have the technical/business expertise to deliver on its vision?
Dig deep into the team’s professional background.
Check their profiles on LinkedIn and Twitter.
If you are investing in a smaller altcoin, founding team is key.
4) Funding
99% of NFT projects have failed to survive this bear market.
Primarily because they ran out of money.
The best ideas will fail if they don’t have the money to build their solution.
Does the company have sufficient funds to survive a bear market?
Do they have money to scale their business?
You can find funding information on Crunchbase.
Broke projects won’t make it to the next bull market.
5) Tokenomics
Before investing, ask:
Where is the token being used inside their ecosystem?
What is the distribution of tokens?
What is the inflation rate?
A good project will mention demand drivers, token distribution, vesting schedules and inflation rate of their token in the whitepaper.
Read these sections carefully before investing.
A great project with bad tokenomics is worthless!
6) Roadmap
In the 2017 ICO frenzy, founders raised millions and then disappeared in the Bahamas.
They would hire some writers on Fiverr, create a kickass whitepaper, raise millions, and then go poof.
You must see how a project is using their funds.
Are they delivering on their promises?
Are they consistently building during the bear market?
In the bear market, the shit projects rebrand to AI companies.
The best projects double down on their roadmaps!
These are the most important questions to ask before investing in a crypto project.