How do you separate the good from the bad? By asking the right questions. A good checklist is useful in analyzing a coin, the project’s tokenomics, and the team behind it. Here is the first part of the article.
To help you with this, let’s break it down in layman’s language to guide you on your next action when buying crypto.
Tokenomics
Tokenomics focuses on token distribution, circulation, usage, and full-range use cases. Of course, it is poised to value these aspects. They are actionable factors used to identify a cryptocurrency’s value. So here it is in a nutshell:
“Why are my coins constantly dumping?” That’s cause you didn’t analyze the tokenomics!
But still, 99% of people choose to ignore it.
This simple guide will teach you to read tokenomics like a pro 🧵 pic.twitter.com/3sOjCaTIyF
— DeFi Warhol (@Defi_Warhol) September 10, 2024
1) What’s the token’s utility?
Ask yourself: Why does this token exist? Is it critical to the protocol’s operation, or is it only a speculative asset with no real use case? A strong utility gives a token inherent value.
For example, Ethereum’s ETH powers smart contracts, and Chainlink’s LINK is integral to its Oracle network. Utility-based tokens that can function within their environments are better than the ones designed to enjoy the hype.
2) What’s the market cap to Fully Diluted Value (FDV) Ratio?
This tells you if the token is overvalued or undervalued, which will help you determine whether tokens in a specific contract are overvalued or undervalued by the market. A current market cap lower than the FDV means many tokens can remain locked up, which may put selling pressure in the future. Discover more in this X thread:
I’m a little bit surprised that people don’t know why both market cap and fully diluted valuation is crucial for your investment plan.
Let’s change that today.
MCAP / FDV can make you or break you, I will teach you why in only 5 minutes: 🧵 👇 pic.twitter.com/9RDV7e6pC5
— hoeem (@crypthoem) August 21, 2024
3) Does the token create value?
Are the tokenomics development strategies meant to increase the token’s value over a given period? If so, see if the project and/or team create genuine revenue/fees for token holders. Here is a good example of this topic:
“having our own native token allows us to create an incentive structure, so we can share revenue back to users” — @NyxNoLimits
• your data = your money
• better insights = more value
• more sharing = bigger rewards pic.twitter.com/j1phPOQcsO— Pulse (@PulseNoLimits) December 19, 2024
4) Is It Inflationary or Deflationary?
It is also widely known that the existence of inflationary tokens leads to an increase in supply, which is never a good sign. Deflationary tokens decrease their supply and hence increase the value of each token over time. It is best explained through this example:
Ever wonder how a deflationary token works in practice?
This thread examines the @zigchain Buyback & Burn Program and tracks its progress over the years, revealing the impact on token supply and value🧵👇 pic.twitter.com/V6H7wKiJQv
— Iko | Web3 (@IkoWEB3) October 3, 2024
5) What’s the Vesting Schedule?
Vesting defines the time of unlocking locked tokens. If a large number is unlocked soon, we may experience a situation when its implementation will lead to a price dump. Here is an example:
Now, let’s explain what Sound Money is and the concepts of Inflationary/Deflationary tokens.
Understanding these concepts is crucial in grasping how a vesting schedule can impact token prices.
Here is my request 📸👇 pic.twitter.com/VUxReAeI9B
— 𝗰𝘆𝗰𝗹𝗼𝗽 (@nobrainflip) June 25, 2023
6) Where Are the Unlocks Going?
Token unlocks: who stands to gain the most?
- Team & Investors: A high allocation to insiders could lead to price dumps when they sell.
- Community: Tokens allocated to the community are generally healthier for long-term adoption.
Here’s a list of upcoming token unlocks:
Over the week, the crypto market will experience a significant wave of token unlocks. There will be a combined value exceeding $759 million worth of unlocks. This includes both large single-event unlocks and linear unlocks from projects like APT, SOL, NEON, and AVAX. 👇🏻🧵 pic.twitter.com/fZPavLNa87
— Tokn (@ToknNews) January 7, 2025
7) Is There a Long-Term Plan for Tokenomics?
Projects need adaptable tokenomics to survive. Look for projects with a long-term strategy for managing token supply, demand, and utility. An outlined plan demonstrates that the team is prepared for development and competition.
The Team: Who’s Behind the Project?
A powerful team can make or break a project. Here’s what to ask:
1) Is the team doxxed?
A doxxed team (a team that shares its identity) is more likely to be accountable to investors and the community. Anonymous teams aren’t bad (e.g., Bitcoin, created by the pseudonymous Satoshi Nakamoto) but carry higher risks.
The best investments are always doxed teams where you can tell the dev’s have aptitude and a drive to succeed
Bet on teams not ideas
— Rhone (@Rhoneus) January 7, 2025
2) Do They Have a Good Track Record?
Has anyone on the team worked on a successful crypto project or related fields? If a team is to be successful, then the team must have the right history of invention and implementation. Here is an example:
What is @Polkadot?
⎼an eco of 100+ connected modular, app-specific blockchains secured, governed, & operated by $DOT
⎼built by @gavofyork, who invented the EVM, invented Solidity, and coded Ethereum after Vitalik wrote the whitepaperHere’s a 3.5 min explainer on Polkadot: pic.twitter.com/1VGXKuS4WP
— Dan Reecer (@danreecer_) July 12, 2022
3) Are the advisors credible?
With the help of advisors, a project appears more credible and convincing. Regarding these advisors, ask if they are affiliated with other successful projects. For example, many people say that Cardano’s CEO can be a good advisor for Trump.
Throwback to when @IOHK_Charles spoke before Congress on behalf of the whole crypto community.
He didn’t even mention Cardano—showing he truly cares about the industry, not just his own project.
Who else thinks he’d be an excellent crypto advisor under President Trump? https://t.co/tlePIv1HB1 pic.twitter.com/ScAUEUrPTw
— Cardano Curation (@Cardanocuration) November 8, 2024
4) Have They Held AMAs?
Taking part in AMAs and interviews shows the team wants to connect more with their community. Listen to how they articulate their vision, respond to criticism, and explain their roadmap.
Consequently, a team that is well-coordinated and informed of the overall objective of a project is more trusted.
In all honesty this is the best AMA I listened to in a long time 😳
Listen to it if you are willing to understand what a truly sustainable and scalable AI business model in order to be more knowledgeable to distinguish real future opportunities from scams/vapourware 🙏🏻 https://t.co/xDNC9Bjpuy
— JustDario 🏊♂️ (@DarioCpx) January 7, 2025
5) Do They Deliver on Their Roadmap?
The past performance you get will eventually be a pointer to what the next performance will be. Check whether the team has met its roadmap milestones. Missed deadlines can show poor planning or a lack of commitment. Here is an example:
🔥BREAKING: https://t.co/GuuXE3NYGZ released their 2025 roadmap on https://t.co/wgYwqW374S pic.twitter.com/ZHOl4bDYsz
— Kaan (@KaanCronos) November 6, 2024
6) Do They Have Strong Partnerships?
The involvement of major stakeholders within the business helps achieve evidence of the project’s pedigree. With partnerships, crypto projects can gain resources, access to better networks, and technological aid needed for growth. Here is an example:
📢 Partnership Announcement 📢
By collaborating with @PortaltoBitcoin, swapping stSTX, stSTXbtc & Stacks assets with other chain tokens will be possible using Portal.
This will make the @Stacks ecosystem even more accessible to crypto users.
🧵 ⬇️ pic.twitter.com/kLzQTdYDUh
— Stacking DAO (@StackingDao) January 8, 2025
Conclusion
When buying crypto, you should do your research properly. You will be at the top by analyzing tokenomics and the team behind a project. If you answer these questions, you’ll plan for the market with confidence and precision. Understand that getting into crypto investing is not only about the buzz.
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 the accepted risk tolerance levels of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses you may incur due to 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.