The past crypto week has been very eventful due to Vitalik Buterin’s big dump of shitcoins and Tesla’s news that it will no longer use bitcoin as a payment system. There have been big dumps across all kinds of tokens which ended today with a new tweet from Elon Musk targeting Dogecoin. Of course, we at DeFi cx have always said and repeated to avoid tokens that are pushed by influencers since sooner or later these meme tokens will start a free fall and millions of people will lose money unnecessarily. Be careful and always Do Your Own Research before investing in a project. In short, the famous DYOR. Today we will help you understand what to consider before buying a token! Let’s start
What to check before buying a token
1) Liquidity. A token can be worth millions of dollars, but if there isn’t enough liquidity, the value will only be virtual. It is therefore very important to invest in tokens that have good liquidity on DEXs or tokens that are already listed on strong exchanges such as Binance, KuCoin, Huobi and so on. If the token you like is not listed on any CEX but only on Uniswap, Balancer, PancakeSwap etc, then check that the liquidity is high enough. Personally, I would not invest in tokens that have pools below $500-800k or above a million for large investments.
2) The number of token holders. If you are about to buy a token and you see that it has 50-100 token holders, it is almost certainly a scam. Be sure to always check this before investing in a new project. Usually, quality projects have 600-700 token holders or more, or at least 2500 or more if they have been on the market for several months. The more token holders the better. Obviously, check that they are real token holders and not holders caused by some airdrop. Simply use etherscan to find out this data. All for free!
3) Community. A token can be the best in the world but if it doesn’t have a community, it will never go up in price. So you should always check that it has a good community on Telegram, Discord, Twitter and other social networks. Not only that. Try to check that the community is active and real, not bots or fake members. Just stay in the group for a few hours to see how many users are posting, how much interest there is in the project and how much social activity the community produces. Dogecoin, Safemoon and other meaningless tokens have only grown so much thanks to huge communities that no one can stop.
4) The product. Each token is linked to a project that tries to bring something innovative to the crypto world. Check that the product is up and running before buying a token and avoid investing money in products that only have a whitepaper. For example tokens such as AAVE, MAKER, PNT, YFI etc are great tokens as they make millions of dollars annually from fees generated from the use of their product. This is very important if you want to invest heavily in the long term.
5) The team. Before talking about the team I want to say that I am NOT against anonymous teams. BTC has an anonymous team but it’s still a very good product, so the team doesn’t interest me that much. If however, the team is public, then research the founders and devs to understand the quality behind the project. In 2021 most projects have public teams, so it’s easy to tell a quality project from a shitty one.
6) The roadmap. A very important part of any project is the roadmap. The longer and more comprehensive the roadmap, the better the project will be. If the roadmap is only a few weeks long, then the devs don’t have clear ideas or are not that interested in their project. If the roadmap is several months and/or years long, then you can rest assured that the devs are putting their heart and soul into making their project perfect and an integral part of their lives.