- The crypto market is volatile, and a strong understanding of the asset class can help you navigate it.
- DYOR is crucial because there’s a lot of noise in the crypto world, and research can help you distinguish useful information from noise.
- The methods of DYOR include fundamental, technical, sentimental, on-chain, and social media analyses, apart from reading whitepapers, keeping up with current news, and educating yourself on tokenomics.
- When doing your own research, always get information from trusted sources, and develop a method of research that works for you.
If we ask – do you do your own research (DYOR) when you invest your money to buy a new car or house? Without a doubt, your answer is likely to be a big yes, correct? When you put your money into something, it is common to get an idea of its viability and understand whether it is the right choice. To do so, you invest your effort to research. This same notion has also gained quite a popularity in the cryptocurrency space, with DYOR in crypto turning into a trend.
From an investment perspective, doing your own research refers to analyzing an investment instrument before employing your money on it, whether it is cryptos or NFTs. This article will discuss the importance of DYOR in crypto and how you can undertake it like a pro!
What Is DYOR in Crypto?
As you probably know, cryptocurrency is a very volatile market, and you might get lost if you lack a strong anchor of knowledge and understanding. To gain this knowledge and understanding, the prerequisite is to educate yourself by researching.
In today’s digital era, you can find information and misinformation almost everywhere. Thus before investing in any cryptocurrency, you need to get an idea of how it works and whether it is the right choice for you or not via research–that’s what we call DYOR in crypto.
Why Is It Important to Do Your Own Research in Crypto?
DYOR in crypto is a popular term used frequently by crypto traders and influencers after they share any tips on “cryptos to invest in” to let investors know that regardless of the tips, they should conduct their research before investing. You can easily find such posts on social media platforms like Facebook, Instagram, Reddit, and more. Some of them even promise you extra-natural returns. However, dear readers, remember that there is nothing like free lunch money in this world. If something is too good to be true, the chances are it is not true at all!
You should know that these influencers or traders are often paid to get traction for particular cryptos to fund the project, regardless of how viable it is. While not every crypto influencer’s post may lack authenticity, it is hard to distinguish the real from the fake one. Thus, it is of utmost importance to do your own research. Additionally, hacking influencer accounts to promote cryptos has also become quite a trend, leading to millions of money lost in scams or Ponzi schemes.
While it is not hard to figure out that Indian Prime Minister Narendra Modi’s Twitter account was hacked, for posts from someone so invested and actively promoting the crypto space like Elon Musk, the chances of falling into a scam are high. To avoid such scenarios, you have to be your own savior. Rely on no one but your own skills.
How to dyor?
Now that you know the meaning of DYOR in crypto, let’s get to the part about how to undertake it and make you a pro!
Before picking a cryptocurrency, you should thoroughly research and analyze crypto. The below methods will assist you in doing so.
P.S. While you become a pro at DYOR, check out Coin Sets to become a pro at investing too.
1. Fundamental analysis
Fundamental analysis helps you in finding the fair value of a cryptocurrency. It involves analyzing the company undertaking the crypto project, the founding team, whitepapers, tokenomics, future roadmap, and more.
The fundamental analysis goes to the core of understanding how much a crypto is actually worth and whether it will survive in the crypto market. Additionally, it includes researching and evaluating the overall crypto industry and competitors to get a thorough idea of the viability of the crypto to make an investment decision.
2. Technical analysis
While fundamental analysis tells you the worth of cryptos, technical analysis provides you with the strategy you will require to enter the market. It includes analyzing the price movements of the crypto you are looking to invest in, comparing it, and finding trends to know when to enter and exit the trade. You can conduct technical analysis by evaluating crypto price charts, reading trends, indicators, candlestick patterns, and more.
3. Sentimental analysis
Sentimental analysis refers to analyzing sentiments of traders regarding the overall market condition or a particular crypto asset. Market conditions are often driven by how investors feel about the direction it can take. This results in overselling or overbuying an asset. The situation may lead to increased volatility and the high probability of you entering or exiting a market at the wrong time. While this does not affect the worth of crypto, it certainly affects its price and, as a result, your investment. Hence, it is a must to perform a sentimental analysis before investing in any cryptocurrency.
4. On-chain analysis
This is quite a complicated analysis but very useful for you to know whether to invest in a crypto or not. The on-chain analysis uses blockchain data and considers different metrics, including a crypto’s transaction value and count, transaction fees, hash rate, staked tokens, etc.
The purpose of conducting an on-chain analysis is to know how stable the blockchain network of the crypto you invest in is in real time. It helps you identify market or crypto patterns.
5. Social media analysis
You can not miss out on social media analysis while DYOR in crypto. The base step of this analysis includes evaluating the crypto project’s website. It should provide you with all the information and future prospects of a particular crypto project.
The next step is to check social media platforms and see what experts and influencers say about your preferred cryptos. However, ensure that the people you seek advice from are unbiased and have nothing to gain personally from your investment decisions. You can also join a crypto community to meet investors having the same interest as you.
6. Read whitepapers
A whitepaper is a document containing the beginning-to-end prospects of a cryptocurrency. It tells you why the crypto started, why it is being issued, the roadmap ahead, and the growth prospects. Thus, it is a must to go through the whitepaper before investing in cryptocurrencies.
7. Read news
This is a basic step for DYOR in crypto, and it has no alternative. You have to keep yourself updated with all the happenings in the crypto market globally. A ban on crypto in a nation or a crypto exchange scam can significantly impact the prices. Thus, you should make it a habit to watch out for any new innovations, regulatory changes, or basically anything that can impact your investment.
8. Educate yourself on tokenomics
Tokenomics is a term made up of two words; token and economics–meaning economic viability of a token. It contains different factors, such as the value and utility of a token, its demand and supply, the purpose of creation, incentive strategy, and more. This is very crucial to know when you are planning to invest in crypto, as its feasibility depends on how well-constructed its tokenomics is.
Checklists of Questions to Look Out for DYOR in Crypto
It is always a good idea to prepare a checklist of questions to make your crypto investing process smoother. Below are some points you can include for your DYOR in the cryptos checklist.
- Why has the start-up/company launched, or is launching, the crypto?
- What is the utility of the token, or what solution does it provide?
- Does the whitepaper communicate all the required details in detail?
- Do the official website and social media pages of cryptocurrency state clear and accurate information?
- From where does the token get its value from?
- What does the fundamental and technical analysis say about crypto? Is it the right price and time to invest?
- Which are its biggest competitors, and where does the crypto stand in the competition?
- Are there any shortfalls of the crypto?
Things to Consider While DYOR
Well, we have already covered all the important aspects of DYOR in crypto. There is nothing much left except a few things that you should remember while doing your own research.
- Always get information from trusted sources.
- Not everything you read is true, even if it is your favorite influencer; research on your own before making a decision.
- Do not invest your money without understanding the ins and outs of crypto.
- You are likely to make mistakes while doing research, but eventually, you will improve.
- Make your unique research method, which you can quickly refer to for investing in crypto or any other assets.
The Bottom Line
The thumb rule of investing in crypto, whether as a novice or a seasoned investor, is to understand the space you are planning to enter. You have to be ready to put your soul and mind to work for doing your own research. It will help you see crypto assets from different perspectives and make financially sound decisions.