Essential Checklist for Buying Cryptocurrencies

To avoid falling victim to fraudsters, do your research when buying crypto. Often, individuals get swept up in the latest craze and buy into an ICO without doing their due diligence.

They end up with worthless coins. You should be looking to answer several questions when assessing a project. Answering these questions increases the likelihood of success. Here’s a simple yet powerful checklist to guide you before buying crypto.

1) What’s the Unique Selling Point (USP)?

Why does this coin exist, and what makes it different from the thousands of other cryptocurrencies? A good project is a project that challenges a different problem or brings some innovation. For instance, Bitcoin was valuable because it was the first decentralized digital currency, while Ethereum gained value due to its added functionality of smart contracts on a blockchain. A unique selling proposition gives the project direction and differentiation in a saturated industry.

Ask yourself: Is this project something new, or only the next copy of an existing coin? If it is a clone, you may be sure it will not bring any value in the future.

2) Is There a Product-Market Fit?

A cryptocurrency’s success depends on whether it solves a real-world problem or addresses a specific market need. Product-market fit means the project has found its audience and is in use.

Look for projects with traction—like active users, partnerships, or real-world applications. For instance, blockchain gaming tokens with a loyal player base or DeFi platforms solving key inefficiencies often have a higher chance of long-term success. Avoid projects that are all promises and no action.

3) Does It Have a Strong Community?

The backbone of any successful crypto project is its community. A strong, active, and loyal community shows people believe in the project’s vision. Check social media platforms like Twitter, Telegram, and Discord to gauge engagement.

Projects with inflated follower count or over-aggressive promotional campaigns could signal price manipulation. An engaged community discusses the project’s utility and future, not only the token’s price.

4) Is the narrative compelling and timely?

Projects aligned with trending narratives—like DeFi, AI, gaming, or NFTs—often gain more attention from investors. For instance, in 2021, DeFi tokens soared during the DeFi boom, while AI-focused tokens gained traction in 2023 as artificial intelligence became a hot topic.

Ensure the project’s narrative is relevant to the current market cycle. Solid projects will sustain value beyond temporary trends.

5) Does It Have a Competitive Advantage?

What makes this project better than its competitors? A competitive advantage could come from superior technology, a strong partnership, a unique use case, or being a first mover in its niche.

For example, Chainlink gained traction because of its dominance in blockchain oracles, and Uniswap became the go-to DEX thanks to its simple design and liquidity incentives. If a project can be easily copied without losing its edge, it lacks a strong competitive advantage.

6) Are comparable projects anchoring their value?

One way to gauge a token’s potential is by comparing it to similar projects. Check their prices, market caps, and use cases to set a benchmark. This will help you estimate the value of the coin and its price.

For example, if you’re considering a new DeFi project, compare it to established projects like Aave or Curve Finance. If the price seems too high for a project with limited adoption, it might not be worth the risk.

7) Are trusted influencers backing it?

Genuine endorsements from credible influencers and thought leaders can signal legitimacy. However, it’s important to distinguish between genuine support and paid promotions. Many influencers receive hype tokens, so their opinions might not reflect a project’s value.

Look for endorsements from reputable figures with a track record of successful predictions or involvement in strong projects. If they’re genuinely excited and provide in-depth analysis, it’s worth paying attention.

8) What’s the Roadmap?

A solid crypto project has a clear, achievable roadmap. It should outline short-term milestones and long-term goals. Assess the realistic goals and whether the project has met past milestones.

A vague roadmap with no deadlines or over-ambitious plans should raise red flags. A good roadmap shows the team’s commitment to growth and transparency about their vision.

9) Have They Addressed Risks?

All investments carry risks, but you can’t ignore some red flags. Watch out for:

  • Bundled Token Supply: Centralized control over many tokens increases the risk of market manipulation.
  • Rug-Pull Risks: These happen when developers suddenly abandon a project after cashing out investor funds.
  • Honeypot Scams: Malicious smart contracts prevent investors from selling their tokens.

Always check if reputable firms have audited the project’s smart contracts and whether the results are publicly available.

10) Are They on Centralized Exchanges (CEXs)?

While not mandatory, listing on a major CEX often signals a project’s legitimacy. If a token isn’t listed yet, check whether it meets the typical listing criteria (e.g., trading volume, market cap, and community size).

Projects not on exchanges might still be legitimate, but they carry extra risks like low liquidity and limited access.

Conclusion

Buying crypto doesn’t have to feel like a gamble. By running through this checklist, you’ll be ahead of most investors. You can use this checklist to improve your chances of making smart investments. Remember, the key to success in crypto is preparation and patience. Answer these questions for any crypto you want to buy, and you’ll confidently step into the market. This article has a second part going deeper into other factors to check when buying crypto.

Disclaimer

The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment and informational purposes only. Any information or strategies are thoughts and opinions relevant to accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.

We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.

Copyright Altcoin Buzz Pte Ltd.

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