The Fundamentals of How to Research any Digital Asset

Warning: Long Article Ahead. But there are no short-cuts to successful investing in the digital asset space. If you’re looking for an easy way to make a buck, this is not the industry for you. But my guess is if you found yourself reading my previous articles, you are here to learn, to grow, and to share.

Welcome.
Let’s get started.

First, when assessing whether or not a digital asset project is investible, start with determining what is your “time-horizon”. How long are you looking to be invested for? Less than a year or more than a year? A couple points on time horizon:

If your time horizon for digital assets is less than one year, then then this particular blog is probably not for you.

You want resources on digital asset trading and technical analysis. There are great resources already in this space, personally I recommend the following voices on Twitter: @BCBacker, @TechDev_52, @JTheretohelp1, @CredibleCrypto for such insights. TA is an entirely different ‘animal’ and outside the scope of these research tools.

This is fundamental analysis not technical analysis.
If this is you. I’ll save you the time. You should stop reading here. But if you’re here for a deeper sense of knowledge beyond the fibs, channels, and trading ranges, Let’s proceed:

To be successful in your digital asset investments, it works best to have a long-term time horizon. Me personally, I must have a minimum of a 3-year time horizon. The minimum amount of time that I would hold a particular asset before cutting bait. This helps me in the emotional swings that the market produces.

Most of us are here for exponential gains. Exponential gains requires price volatility or the rapid movement of prices up (or down). New investors often get scared when their token crashes 80% of their purchase price. This brings us to the first reason WHY you Do Your own research by studying the fundamentals of a project:

#1. When you know what you hold (i.e. the fundamentals of the project), you understand the true value of the coin and price doesn’t matter.

Which means I am valuing what the asset’s current price is today versus where I think it can reach 3 years from now.

With your established time-horizon fixed, you now have a ‘lens’ which you are going to use to interpret the fundamental information that you are about to gather about your particular digital asset.

What most investors are looking for is what has the best chance of maximum returns over my time horizon?

Now, let your research being:

Step 0: How I find new Digital Assets to Invest In:

You might start with a particular coin or project that you have just become aware of or you might start start by picking a coin or project through a resource like CoinMarketCap.com .

Most digital assets have an abundance of great ‘first layer’ information on popular crypto market metric websites like CoinMarketCap, CoinPaprika, or CoinGecko.

I always look at the high market capitalization first because they tend to me more established and typically have an abundance of information already easy to find. This lowers the risk profile or the chance of your investment going to 0 overnight. And if you think, “That’ll never happen to me.”

Pride commeth before the fall.

Everyone naturally has an intrinsic “illusionary superiority” bias when it comes to their own intelligence. Or in short, we think we are smarter and more capable than average.

And yet that’s how most people get “rekt” (or lose everything) in this digital asset investments (See: https://www.coinopsy.com/dead-coins/) The road to crypto riches is paved with thousands of dead coins and projects that went to 0 overnight. Don’t let happen to you.

I usually hear of new projects and ICOs via Crypto Twitter and YouTube. But don’t misunderstand me. That does not mean I buy instantly based on what I find. I still need to do fundamental research before I click the ‘buy’ button.

Twitter and YouTube often push me into other sources of information on the projects: Discord Channels, ClubHouse Rooms, and Telegram.

If you don’t have a presence on those platforms, I highly recommend you do. While I think social media is a terrible medium for sifting through credible information, it appears to be where information on these projects tends to drop first. The more you engage here, the more you will be able to curate who you follow. Mind you, this will be a continual process for you. You will always be evolving as you get more comfortable in this space.

Personally, If I’m really looking to gamble, places like CoinMarketCap have links like an ‘ICO calendar tab’ (short for Initial Coin Offering, or a schedule of when new digital assets projects are coming online). I have rarely invested any capital into ICOs as information on them is often scarce and unreliable and the risk is just way too high for me in a space that is already high risk enough. If you live in the US the regulatory risk is also VERY high.

Now onto Step 1 (yep, only at step one, this far into the article):

Step 1: Once you find a digital asset that peaks your interest, Do a ‘deep dive’ on the project’s official webpage:

A “deep dive” simply means asking lots of questions. Spending the time reading everything you can find. This is very time consuming, but the more you read, the more questions you ask, the more you will be able to make sound decisions on your buys and sells.

Here are the questions you should be asking on your ‘deep dives’ on project websites:

1. Is there a problem clearly identified? -A digital asset should be designed to solve a real problem. If a problem isn’t clearly identified, why would a solution (i.e. their solution) matter?

2. Is a clear solution explained and is the solution only solvable by the use case of this digital asset? — A horse and buggy is technically a solution to a transportation problem, but that doesn’t mean that is going to make me money.

3. Is the solution explained in simple terms?–I think of the old Michael Scott (from the TV Show The Office) line–, “Explain it to my like I am a five year old.” Good investments are often easily understood in terms of problem, the use-case, and solution. If you can’t understand the problem in one sentence, it’s most likely too complicated to be worth your investment.

If you don’t feel that the problem is an actual market-felt problem, then it also is more than likely not worth the investment risk. Remember to rise-above the social media ‘hype’ (see previous article on how to NOT research a digital asset project).

You are not out to be a project ‘fan-boy/girl’ .
Your goal is to make money.

Watch for those narratives and emotions and catch them before they can take root in the recesses of your mind to inform your biases.

4. What is the Use-Case for the digital asset? — Do you feel that the digital asset actually solves the problem? You will find many projects that claim that their solution solves the problem and yet they lack real partnerships with other organizations that are trying to solve the same thing.-they often lack real world implementations of their networks.

Additionally, many projects are already getting into a heavily competitive space that is competing for business with many other industry players. This further adds to the risk profile of the asset and needs to be noted in your fundamental research.

Don’t forget that the goal of the company website is to cleverly market their product (i.e. their coin, network, project, etc.) to investors.

They will use imagery and language on their website, white paper, social profiles, and videos designed to lure investors in. Actually, most the blue-chip projects that have already been successful do little to hype up their project. They instead display a steady commitment to their vision and roadmap and casually invite others along the journey. Pay attention to the language your project is using. Is it hype? or Substance?

5. What are the stated ‘Tokenomics’ of the Asset? — This should clearly explain how the token is or digital asset is going to be distributed or has been distributed.

Bear in mind that the distribution method, schedule, and supply of a digital asset will largely effect the top end price range of an asset in this space.

If a large portion of the coins are held by the founders, foundation, organization, then this is cause for me to dig deeper to understand how the central parties plan to further distribute the token.

The tokenomics of a project has an impact on the price of the asset over time. Most projects will have this information accessible on their official website labeled under a link, heading or .pdf marked ‘Tokenomics’. If you are having trouble finding it on the official project website, the tokenomics can often be found often within the company’s ‘white paper’. Or by doing a simple google search.

6. Does the Project have Meaningful Industry Implementations — It is not enough for the project to identify the problem, how their project solves it, nor how revolutionary the underlying technology is —

What ultimately matters in all digital assets is a matter of simple business — Is anyone using their solution right now? Early digital asset projects may only be in beta or a ‘test net’ environment so meaningful implementations might not be there for you to see.

If this is the case, price the token’s value relative to other competing projects at similar levels.

However, there are other metrics you can look for if this is the case:

Does the project have any current organizational partners or stakeholders? This may also be listed under a website tab labeled Advisors, Partners, Leadership, Staff, or Governance. Sometimes these stakeholders can be found within the project white paper.

But you shouldn’t only just take the project’s word for it — Can you verify those partnerships through a third-party? Such as on a partner’s webpage or press release? Can you verify through a third-party via a simply google search?

All of these questions help you vet the legitimacy of a projects’ claims.

Remember, any official release from the digital asset project team, leadership, white paper, or website is a marketing item -Designed for industry partners to attract money to the project.

You are not the target audience. Which means you have to not only read what they are claiming, but vet their claims through deeper research and by asking deeper questions.

Most of the time, If you find significant ‘red flags’ about the project based on what you read on the project page, you should think twice about proceeding further— your deep dive on this particular project might end right here. (And many times, it does)

Many projects fail not because of their tech (ex: AOL), or funding (ex: Enron), or use-case (ex: MySpace). Most projects fail because they don’t have a team that can put all the pieces together and execute.

Knowing is half the battle. Execution is the other half.

Step 2: Check the Project’s CrunchBase.com Profile:

CrunchBase.com will give you insights into the legitimacy of the company. It often will list any publicly known official organizational partners or venture capital firms, how much funding is tied to the company, and key people on that project’s team.

This helps you determine both the financial and leadership “health” of a particular project.

Here are some critical questions you should ask when looking at project profile on CrunchBase:

1. Who are the known company executives? — You will be surprised to find that some projects will not list their executive teams on their project site, which is a red flag. Many are investing in projects with anonymous developers where ‘rug’ scams are rampant. They don’t understand the value of a doxxed team with credentialed KYC and background checks. I’m guessing if that’s you, that you’ve never been ‘rugged’. You’ll learn quickly the hard way when it happens to you.

Crunchbase will also link the executives’ personal LinkedIn profiles here as well if they are known, which you can use to see their industry experience and connections.

Many of these projects executives won’t have their profile set to private, which makes it a treasure trove of information for research. I have been surprised to see many project executives with little computer, software, blockchain acumen leading digital asset projects at the C-suite level, which I also consider a red flag.

I have also found to my surprise that many projects are lead by executives that often change jobs and roles and don’t have much career stability or progression. I also find this to be a ‘red flag’ as an investor.

If I am to believe in the project as an investor, it is not a good sign when a digital asset project team has high turnover. What does that say about their belief in their project and their ability to execute to bring the project into maturity (see: PAC Coin)

2. How fast has the project burned through cash? — CrunchBase will list any known public and private funding rounds and amounts. I have found projects that are in Series K funding (that means that have received 11 rounds of funding, e.g. That is not good!) Think of a trust-fund baby that has burned through 11 rounds of cash with little to no success to date. The best indicator of future success is prior success. If a project hasn’t figured out how to be profitable after a decade of building and multiple rounds of investments. What makes you think, they will be successful now? Hard questions that you will need to answer.

3. How long have them been in business? If the project has existed for say 5 years plus with little implementations, partnership growth, new network upgrades or releases, maybe you should be investing elsewhere.

4. Has leadership changed & How often? What has the current progress been since new leadership? — You will generally find that most digital assets are start-ups, which means that leadership stability and growth is what you need to see. Anyone who’s built a business knows how hard it is to get to profitability and to sustain real growth. It’s why most people would rather be employees than entrepreneurs. What you want to see in a project is leadership stability (5+ years amongst core executives). If the executive team has turned over multiple times in less than five years, invest accordingly.

These are just some of the questions you should ask. Obviously, there are many more, but I think this gives you a good base of how to measure the leadership and financial health of a digital asset project.

Only if I feel good about what you have found find in both steps one and two, should you continue your ‘deep dive’ research into Step 3:

Step 3: I Check the Project’s GitHub Profile

Github.com will give you a 500 foot view on the technical aspects of a project’s health. Who is actually building to and contributing to the blockchain. Is the developer base growing or shrinking? Is a team truly building out it’s use-case or is it just one dude in his mom’s basement?

I am not technical and to be honest, I find the GitHub site hard to navigate. I actually don’t use their onsite search. Instead, I simply google “Bitcoin GitHub” or “Etherueum Github” or “Project Name Github”. The results often bring me to what I am seeking — the official GitHub project page.

Sometimes you’ll find that no project page exists on Github for the digital asset project you are exploring. Take note. That’s a HUGE red flag and cause to walk away immediately.

You should check the main Code Repository for the project. This is the source code (the building blocks) that the project developers use to build and improve the project.

From the main project repository, page, you can click the “Insights” link on the page. This will provide you with a few helpful tabs — The true ‘golden nuggets’ that I come to Github for:

1. How big is the project developer base? What is the trend?

(You can find this information under the Contributors Tab)

2. How many commits (submitted code) does the project have? What is the long-term trend?

(You can find this information under the Commits Tab)

3. Has the project ever Forked? (For me this is a potential red flag) If so how many times?

(You can find this information under the (you guessed it!) the Fork Tab)

4. Are there known security flaws in the code as reported by developers? Have they been addressed in a timely manner?

(Under the Security Tab. You get it by now.)

As an example: Here is an Official Project Github Page for Bitcoin: (https://github.com/bitcoin/bitcoin/graphs/contributors.)

For a reference point, Bitcoin at the time of this writing has 28,000 commits with the latest commit happening about 10 hours ago.

Bitcoin also has 788 current linked developers on GitHub.

Reputable projects will have a contributors page.

At this moment, Bitcoin still looks solid from a developer standpoint. (Notice the graph trends)

I like GitHub for this reason, their graphs make it easy for me to visualize the scaling of the project as it relates to developers and the technical aspects of the project in a way that a non-technical person like myself can understand.

Has the project has steadily attracted more developers over its life span? This is another solid indicator you should take note of.

This means that the project has ‘staying power’ from a technical standpoint because it’s attracting more developers to build on it’s platform. When a project is bleeding developers over a long-term trend, the project is dying regardless of what’s being posted on social media.

Obvious red-flags when looking for a project on Github:

1. No Github page. (Is the project even real? It could just be an elaborate fraud)

2. No repository for the project or a declining developer base. You will be surprised how many hyped projects on social media are actually dead projects and have been for years.

Much like steps 1 & 2, if I have significant red flags after looking at a project GitHub’s page. You probably should walk away, but if the project answers your questions in the affirmative, then proceed to your final stage of your research deep dive— markets and technical indicators.

Step 4 –Do some basic market analysis. I use the Santiment Platform. (https://app.santiment.net/)

Santiment is a great tool for conducting basic market and on-chain analysis of the project you are researching. They have three membership levels
— Basic (Free)

— Pro ($44/month)

— Pro + ($225/month). I personally only use Pro Version. If you choose to use the free version, you will lose out on certain metrics like their pro filters and most metrics within the last 30 days. However, with a minimum time horizon of at least a year, the most recent metrics are not necessarily relevent. On obvious exception to this would be a “Black Swan” type of event within the project or ecosystem (i.e. A code exploit or the founders are convicted felons, etc.).

However, if there is a Black Swan type of event that is swirling around your particualr digital asset, your simple google search is going to most of the time bring that to your immediate attention. Or there will be ample discussion on Twitter, Discord, etc. In my experience, you won’t need the most recent on-chain metrics from Santiment to inform you of such events.

What you are going to use Santiment for is to measure the market sentiments on the project as they impact the the “On Chain” analytics of a project. To put it more simply, is the token being used for it’s intended use-case? Is it growing or declining?

You will find that MANY times, a particular digital asset will pump merely on speculation and hype that is carefully crafted on social media platforms. A clear indication of market manipulation intended to get YOU to buy “High” off of FOMO so that wealthy investors (often called Whales) can profit and unload their bags.

Santiment allows you to see if a price increase of a digital asset is truly related to the usage of the project by using their “On-Chain” metrics.

Santiment can also help you see historically if the price increase can be directly tied to social media activity by using their “Social Dominance” metrics. These are just two categories of metrics that you have access to and again most of their metrics are free sans the previous 30 days.

You can use these tools to gauge the growth or decline of a project over it’s life span. They don’t have all coins, but have most of the top 500 from CoinMarketCap, which if you’re just getting started, I your “safest” bets will be within the top 500 (or arguably the top 100 or top 20).

If you are looking for very nascent coins or projects (nascent=young), you might not find their chart on Santiment.

Here’s a quick-start guide on using the Tools on Santiment:

1. Search for a Price Chart in their search bar (ex: HBAR, XRP, VET, etc.).

2. Within the Chart, I always take the “All-Time” within Time Frame option.

Since your time horizon is at least one year, you should not be primarily interested in hourly, daily, or weekly price swings. What you should pay attention to is the movement of the project’s price since it’s inception.

This is often times where I find how long an actual project has been on the chain. Sometimes, a project is a lot older than their websites lead on. This gives me a long-term view of the projects progress and implementation over time.

Within the chart of your particular asset you have the option of using dozens of filters to overlay on that price chart. All of Santiment filters can be found on the left side of the screen. Simply click the “+” for the indicator youwant and then click the price chart for the asset to deploy the overlay. They even have an “i” for each overlay that explains the metrics so you have an understanding of what the metric is displaying.

Depending on the project, not all overlays are available. As you use it, you will develop your own overlays that you find useful to find “buying opportunities”. In the pro and pro + versions you have the option of favoriting your own overlays. In the free version you can save your own charts once you have them set up just the way you like them.

Here are the Santiment overlays that I use the most and why I like them:

1. Social > Social Volume — I have found that a rapid increase in Social Volume in a short period without any other meaningful movement in other indicators could mean an impending price pump or dump as social media volume never remains long term. This is useful depending on timing my buys and my sells.

2. Development > Development Activity — No development activity or low development activity over time is an obvious red flag. This often indicates the project is already dead or dying project, even if the project still has an active social media / website presence. Remember, when a project officially dies, the coin holders are typically the LAST ones to know and by then, it’s too late.

3. Network Activity > Daily Active Addresses (1D) — Are new accounts coming on-chain? I look for a steady trend growth upward over time. The inverse could also mean a project that is in the process of dying or the use-case isn’t a market felt need.

4. On Chain > Whale Transaction Count (>$1M) — I use this to determine how distributed the tokens are. Depending on the project, a Large Whale count at inception but a steady decrease over time I view as a positive because the tokens are becoming distributed out of the control of a few.

Counter-Intuitive to what you might think. It a growing whale transaction count can also be measured as a positive for the project. Remember, institutions are starting to get on board with digital assets and institutions, which will drive (and have in the past) new forms of price discovery amongst the asset class. This could be signaling possible institutional wallets coming online and moving larger amounts of value. Sometimes ‘Whale Transaction Count’ is a leading indicator of adoption of the network.

5. Network Growth — Shows the number of new accounts coming online over time. Ascending over the long-term is what you want to see. Descending over time could be a red flag of a dying project.

6. Volume & Market Cap & Markets — Shows me how liquid the asset is. How quickly and accessibly can I get ‘in’ and get ‘out’ of the asset. Price appreciation doesn’t really matter, if you can’t find a buyer when you need to. Santiment doesn’t have a Markets feature (that I am aware of).

However, you can accessible how many market makers there are with particular assets on places like CoinMarketCap, CoinGecko, CoinPaprika, etc. — The more asset pairs and markets, the better. Little to no markets means the project is more susceptible to manipulation and volatility.

There are many, many more overlays on Santiment, but these are the ones I use most often and find the most useful in my research.

If you’ve made it this far in one sitting. You deserve a drink! Go pour yourself one and come back for the fifth and final step of doing your own research:

Step 5 —Check how the project is being covered via Media Outlets

It’s hard to believe we live in an age where we have to have such a distrust of media. If you have been in this space a while and ever tried looking on MSM outlets you likely have been left with the narrative that digital assets (or cryptocurrencies as they often say) are a dangerous and shadowy world. Reserved only for those with something to hide, fraudsters, and money launderers.

*Sigh

Only recently, are you seeing any neutral / positive sentiments in MSM. You also find a lot of “click-bait” articles created by bots that are just regurgitating the same social media hype dribble. Often true substance about these projects and impact are hard to find.

But even if the narrative in the media is finally starting to shift towards the positives of digital assets, almost no one is actively covering specific projects save for a few high-profile projects.

Further, many are only interested in educating the public on Bitcoin and it’s fundamentals. From a research perspective this isn’t helpful for you when you are gathering information to make your investment decisions.

Even the “news outlets” that were specifically birthed to cover specifically digital assets (I.E. CoinDesk, CoinTelegraph, etc.) are notoriously bad at reporting the basic fundamentals. The truth is the space is still overwhelming dominated by Bitcoin Maxis, or folks who only believe that Bitcoin is the only true use-case and utility for digital assets.

Those of us who have been in since the early days of digital assets remember that most of crypto “journalists” were Bitcoin maximalists. In fact pre-2017, it was neigh impossible to find any unbiased coverage of digital assets projects beyond bitcoin even Ethereum was vilified post it’s ICO-launch.

From all this, I learned that even today, one cannot rely on the MSM nor the crypto media for their fundamental analysis of digital assets.

You too will have to learn to find the news from reliable sources and assess for yourself how current events effect the worthiness of a particular project.

You will have to learn to identify and read through the biases as they appear on your screen as you are reading and scanning the articles.

You will have to train yourself to ask the bigger questions like:

What does this mean?
Is this actually true?
Can I verify these claims with another source?
Is this click-bait?
Am I reading an opinion piece or someone else’s commentary on the matter at hand?
“Is the content aimed at invoking an emotional response in me?”

Learn to check the secondary sources to verify their assertions are true. This will take time. A lot of time. Let’s be honest, people are lazy. I am lazy human being like everyone else. And we are inidated everyday, everytime we are online, or pick up our phones to read fast, jump to conclusions, and react quickly with emojis. However, that is not the path to truth. Nor the path to success when it comes to researching in the digital asset space.

I wish there was a better way. But I haven’t found it. If you have please tell me. I’ll maybe send you some crypto as a ‘thank you’.

So if you are new to digital assets remember this and never forget it:

Everyone has an angle in this space.
Everyone.
Don’t trust any news outlet, personality or publication without checking out sources for yourself.

We call this FUD. (Content that are designed ONLY to stoke Fear, Uncertainty, or Doubt). There is a lot of FUD. The only way you will learn to recognize it and see through the bull****. Is to practice good investigative habits, check sources, check third-party sources, and ask good and deep questions.

So if you can’t trust the MSM nor the standard crypto news outlets, where can you find news related to your prospective project?

I have found a news aggregator called News Now (newsnow.com) the most helpful for digital asset project news.

The website scans the internet for published sources of news related to a specific topic. Their topics can include any term you decide.

So you can search for ‘Digital Assets’ ‘Cryptocurrencies’ or ‘Diem’ (Facebooks’ failed stable coin project, if you didn’t know)

It will pull from thousands of online publications and sites any news related to that topic.

This makes finding ‘breaking news’ on particular projects very helpful.

Depending on the project, you might not find a lot. And yet there will be times that you will be very pleasantly surprised. You will use this information only as a piece of of your larger investigative puzzle and include it into the whole of your fundamental research.

Here’s a quick tip: Never buy the solely on what you read in the news.

In fact, for me, I weigh news the least amount in my fundamental analysis.

Here are some questions that I ask when aggregating news regarding particular digital asset projects:

1. What is the news publication cycle for this project? — More posts, more releases, more implementations, more news is a good indicator. No news, no releases, long periods of time between publishing’s about the project would be a potential red flag.

2. Is there pending litigation against the team / project? — If the project is under investigation or government enforcement action, often it will hit the news. I would often find this information on the project’s official site.

Conclusion: Putting all the Pieces of Your Puzzle Together

Now once you have collected all this information. How would you rate the overall information that you have found on the project. You obviously will have a ton of information to make sense of. A simple way would be to categorize all the information in a “Pro / Con” list and see which side wins out.

For me, it’s not enough to have a simple majority of positive indicators. 80/20 is more my profile. (80%+ or more in the Pro category or 20% or less in the Con category)

You might decide differently. Through your own deep dives, you might also weigh my metrics differently for yourself than I did or find your own “signals” that I didn’t even mention here. That’s ok.

By the way, what do you think I missed in my rubric of fundamental research of digital assets? I’d love to know. Leave a comment below.

As you aggregate your research you will clearly find some unmistakable truths about your projects:

1. No project is perfect.

2. All projects have risks.

I have a low tolerance for risk in this highly speculative space so my risk threshold for digital asset investment is a lot higher than most I have talked to in this space.

To be fully transparent as of the time of this writing, 95% of my digital asset portfolio I have assessed as clear leaders and winners in their business proposition. Which in my calculus means they those projects have overwhelmingly more upside than risk.

That is not to say that I am not staked into some very risk digital asset projects. However, those investments are a small percentage of my portfolio (often less than 5%).

When investing money in digital assets, when I invest in a particular project, I basically treat the money as spent and never coming back.

Once it’s gone, it’s gone.
Like a penny stock.

As you become more comfortable in your own research, you too will gain confidence in your victories and learn from your mistakes.

You will then apply your learning form those mistakes to make your future research even better.

I want to leave you with one final encouragement.– No one is going to care more about your investments than you.

As you can see doing all this research takes a LOT of time. On average, I now spend around 40 hours researching each project that I have invested in. When I was just getting started, it was probably closer to 80 hours per coin. I’ve obviously learned something that I have shared here to hopefully give others a head start on their digital asset journey.

This is NOT a short-cut to instant riches. At the same time, the more you research, the more you will tweak your own strategies and adapt to information that you have found successful.

You may not use all the metrics I use and that is ok. But hopefully this gives you a place to start and a place to get meaningful information as you Do Your Own Research (DYOR).

Learn to put the work in and DYOR (Do You Own Research). There are no short-cuts to long-term success in this space.

No one is going to outwork you when it comes to YOUR money and YOUR long-term wealth.