Doing your Due-Dilligence

If you’ve followed any investment news over the past few months, you’ve probably heard of a place known as “Wallstreet Bets”. This is a place on Reddit, where people go to talk about investing. Much like the proverbial, needle-in-the-haystack, sorting through it can be a mess. There are many such places on the internet that will entice you with wild promises: lambos, 100x profit, financial freedom, etc. These forums can be useful places to find the new hot-coin, or one where you’ll lose all your money and end up in the poor house. I’ve found some exciting projects through here, and seen way more scams and memes. The crucial difference, is due-dilligence. Do your own research (DYOR).

Doing your own Research (DYOR)

Look at the website homepage.

If you’re a coder, some of the things you can look for:

Do they have a public Github? Check it out and look through the code
Have they deployed various smart contracts already? Go through those on the Blockchain Explorer.
1. Has an outside entity audited it? Has someone checked it for known security vulnerabilities?
2. Is it similar to or a copy of another contract? Since Smart contracts are public, many scams will copy the code of a defunct project and use it as their own. This is not a red flag in and of itself, but it can be a telltale sign.
3. Does the code line up with their description?
Identify the developers and look at their Github’s previous projects. Are they similar and do they have experience?

Important Tokenomics Questions:

What is the circulating and total supply?
How many current holders are there?
1. Do institutional backers and developers have their liquidity locked for a period of time?
2. Is there anyone holding more than 3% of the supply?
Where is its value derived from?
Can I buy it from major exchanges and institutions, or only on Decentralized Exchanges?

In a time where FOMO is rampant, it’s easy for people on the internet to pump and dump coins. Ask yourself where your information is coming from:

Is it being shilled by other people on Reddit?
Are major news or crypto outlets talking about it?
Who is the person you’re taking advice from?
Is analysis being made from a technical perspective or a business one?

Social media can be useful sources of information, but you should do your own research on anything you read. Be skeptical, but also open minded.

Trust, but verify.

Be wary of:

Youtube personalities
Various subreddits.
Discord Servers.
Celebrities and Influencers

Crypto-Youtubers

“Don’t trust people on Youtube promising to make you rich”. Groundbreaking stuff there Josh.

Fair enough, but it’s more common than you think. People like Bitcoin crypto and Bitboy are youtube personalities. They are there to lure you into watching their videos and don’t care about the coins they pump. Anyone with a thumbnail including “100x”, shocking faces, and use of caps-locks, should be avoided.

You should instead look for youtube channels explaining the technics behind these coins. Understanding the technical capabilities behind it will give you a much better understanding of what value it holds. Channels such as Finematics, do this very well. They give technical explanations behind Cryptocurrency innovations, with no price predictions.

I also enjoy listening to The Daily Crypto Report podcast, and Into the Ether, available wherever podcasts are found.

I have not been paid to endorse any channels, I’m just a fan.

Reddit & Discord

I’m going to get a lot of hate for this, but it’s important that you know.

Reddit can also be a powerful tool to bring people together, but there’s a lot of dumb-assery. There are many subreddits such as

Be wary of these, as they will shill meme coins. Unless you know you what you are looking for you can very easily fall-prey to the littany of meme-coins and scams. The coins being promoted here are often done by people looking for short-term gains by buying into literally anything with a few key-words.

Some of them will make money, and many will lose. Just because Catcoin is worth $.0005 and uses the Binance Smart Chain, doesn’t mean you should buy it. Words like “deflationary” and “locked liquidity” are important, but it doesn’t mean you should buy it just because. Literally anyone can copy the code for Dogecoin and make a new one, and lots of people have had the rug pulled.

In cases where coins are very low-priced, there’s a common problem with whales. These are people who own substantially large holdings of a coin, and have the potential to cause massive fluctuations. There are many examples of whales, and even organized groups, pumping coins on social media only to leave you holding the bag. These are “pump and dump” scams.

Chains like the Binance Smart Chain have a lot of buzz, that is has arguably earned, because of its low fees. However, these low fees also make it easy for anyone to deploy a scam. Has a project deployed on the main ethereum chain? This can often be an indicator that they have financial backing and confidence to pay the transaction costs of the main chain. There are many great projects deployed on side-chains and alternative platforms. This can be because many contracts have high transaction fees that come from it being a complicated program. Just because it is deployed on an alternative chain, doesn’t mean it is a scam. But, many scams do deploy there.

I’m very against day-trading, as 95% of all day-traders will lose money. Trying to pick the meme coin to rocket up 500x is a stupid decision. This is why I personally, only make decisions on coins that I can imagine holding for a longer period of time. If you want to try your luck at some short term plays, go for it. I prefer long term holds.

Important Final Advice

Much like in regular stocks, you should always go in with the mindset that there are no overnight millionaires. This will help you pick your coins better because you’re looking for sustained long-term growth.

The best way to invest is to find a criteria that works for you and follow it. There will be coins you miss out on that go up. You need to put on your blinders and focus on the decisions you’ve made, and the coins you’ve chosen. Take the emotion out of it. Don’t fall for the fear of missing out. It’s not a competition. For every Dogecoin millionaire, there’s 100 people who lost it all.

If you follow some of the other rules in this guide, then you should be ok. Even if you do fall for a scam, then the impact won’t be portfolio-shattering.