How To DYOR In Crypto in 2023
As we settle into the New Year, many hope 2023 will usher in a clean slate for crypto. Because let’s face it, 2022 brought its fair share of shitshows and drug-addled defrauders.
It’s time to move forward. But if recent history has proven anything, it’s probably best to proceed cautiously.
This involves time-honored investing advice that will never go out of style: Do your own research (DYOR).
But while plenty of people out there harp about the importance of DYOR, few take the time to explain what that actually means. What kind of research are you supposed to be doing and where?
You’ve come to the right place to find out.
Know and Understand the Hell Out of Your Trading Style
The truth is that your trading style will determine what kind of research you should do. Broadly speaking, there are three main styles:
- Day Trading
- Swing Trading
- Long-Term Investing
If you’re still a bit shaky about the difference, it’s time to learn what each one means once and for all. Why? Because each requires a very different set of tactics and types of research to pull off well.
Crypto day trading is the art of buying crypto and then selling it again on the same day. You might only hold for minutes, hours, or even seconds before cashing out.
The idea here is to profit from short-term price moves that come with volatility. As opposed to long-term trading, the upside of day trading is that you don’t necessarily have to worry about what the coin does or whether it’s a good investment.
Your main concern is finding a coin experiencing drastic price movements and learning to capitalize on them. This primarily comes down to becoming insanely skilled at reading charts. In this instance, DYOR will refer more to understanding things like candlestick patterns and moving averages than what a coin is or does.
Swing trading is a middle ground between day trading and buy-and-hold investing. It involves buying crypto and holding it for more than a day, but not necessarily for years.
The idea of swing trading is to capitalize on price swings that play out over a few days, weeks, or months. So while chart reading and other technical analysis skills are helpful, it’s probably no surprise that you’re also going to want to know much more about the coin you’re investing in than a day trader would.
Before we get into what that entails, let’s go over our last investing style.
Long Term Investing
Long-term traders are in it for the long haul. Massive price swings? They don’t care. Exchange meltdowns? No F’s given.
Long-term trading involves knowing a coin so well that you’re willing to buy and hold it for years. But, of course, if you go this route, you’ll want to choose a coin you believe will only go up in value as the decades roll on.
This is where you need to DYOR AF when it comes to knowing a coin inside and out.
Long-term investing is best when investing in established crypto companies. But adept and savvy investors can find hidden gems and ride the wave all the way to the top.
DYOR Crypto Essentials
As you can see, all styles of trading involve research. If you’re a day trader, your research may be geared more toward chart reading and technical analysis than knowledge of certain coins. But, if you’re a swing trader or a long-term holder, there are some things you’ll want to consider before throwing your cash at a particular token. So here are some questions you’ll want to ask yourself when looking into crypto investing prospects.
What Does It Do?
Would you buy stock in a random company with no idea what products or services they offer? Probably not. So why would you settle for any less when it comes to crypto?
Take a look at the project’s whitepaper and website. If it’s a legitimate project, it should have both, and they should be very professionally done. Coinbase also has a solid set of free courses on different cryptos, which you can even earn free coins for taking.
Try to find the answers to questions like:
- Is it a coin or a token?
- Is it a value coin, utility token, or layer 2 solution?
- What problem is it designed to solve?
- How does it solve the problem better than competitors?
Who Else Is Into It?
Throughout your research, you’ll always want to learn as much as possible about the team behind a project. Find out all you can about the founders, who they are, and whether they have the credentials to keep the project up and running long-term.
It’s also important to remember that crypto prices don’t move by themselves. Look into what kind of following the coin has and how much trading volume it regularly pulls in. Here are a few great resources that can help with this end of your research:
- LunarCrush is an excellent tool for following crypto social influence and analytics
- Santiment is another killer tool for up-to-date social and financial information
Lastly, pay attention to what exchanges the coin trades on. If you have difficulty finding it available for trading on a reputable exchange, consider it a high-risk coin.
Take a Look at Tokenomics
As plenty of meme coins have proven, social hype isn’t everything. So don’t forget to ask critical financial questions before you jump on the latest bandwagon.
Tokenomics basically comes down to understanding a crypto’s supply and demand. So here are some questions that can give you great hints as to how much a coin’s price will increase (or fail to increase) over time:
- First, is there a supply cap? If so, how many coins will ever exist?
- If there is no supply cap, is there a burn rate?
- How many are already in circulation?
- How quickly are new coins being released?
More Fun With Financials
When looking into potential investments, you’ll also want to look at the market cap, the number of coins in circulation right now multiplied by the current price. The higher the market cap, the higher the likelihood that the coin is already pretty well established.
Then, there’s the coin’s historical chart, which is an easy way to check its price history. Look at how well the price has fared over the past few days, weeks, and even years. If you’re into day trading, you’ll want to narrow your timeline to minutes or seconds.
This can help you get a good idea of everything from how much volatility the coin tends to experience to when to buy and sell. While most exchanges have solid chart systems built in, here are a few great resources to help you DYOR on financials.
- Messari offers professional-grade research and charts to take your trades to the next level.
- TradingView offers charts, news, and research on both crypto and stocks alike.
- Glassnode is a great resource for getting an inside peek at what’s happening across different blockchains.
While everyone’s DYOR tactics look a bit different, hopefully, this has given you a good idea of where to start. Don’t be discouraged if you don’t understand everything you come across when researching a coin.
The more research you do, the easier it will get. Until then, use your instincts and remember that if something sounds too good to be true, it probably is.