Are you a crypto enthusiast who has invested in the same, based on recommendations from friends, family, or relatives? While trading in crypto, have you taken the decision with a ‘Fear Of Missing Out’ (FOMO)?
Well, there is nothing to worry about! Many investors get lured into the ocean of cryptos, where time and again, we get to hear that some coin whose value was ‘x’ has become 1000 times ‘x.’. However, one should be very careful about the hype created by social media posts or communities.
Protecting capital and making gains in the world of cryptos is both an art as well as a science that can be achieved only if a person follows a simple yet powerful principle, Do Your Own Research (DYOR). To learn more about this strategy, we will first discuss what crypto trading is and what are the necessary steps needed to successfully implement this principle.
When to follow the strategy of DYOR?
To trade in cryptos, one has to visit crypto exchanges, where one can track the price movements of the coin. Crypto coins usually have a lot of price volatility, and one can do crypto spot trading, leverage trading, and make investments. However, as simple as that sounds, often investors get overwhelmed by external news and tips. In such times, one should follow the simple yet effective strategy of DYOR that is (Do Your Own Research).
Let us now understand the steps involved in DYOR.
- Fundamental Analysis –
As an investor, you need to understand certain essential factors about the coin, such as which network has the coin been developed, the technology used to develop those coins, and whether the technology is still relevant and can compete in the industry. For example, Bitcoin (BTC) runs on a Proof of Work (PoW) technology, whereas Ethereum (ETH) runs on Proof of Stake (PoS).
On the one hand, PoW requires a lot of energy and depletes resources; on the other, PoS is environment-friendly and faster.
Additionally, each coin has a whitepaper that informs its investors about the coin. While conducting DYOR, one should definitely read the whitepaper. Make sure the whitepapers are only from verified sources, else the typographical errors might confuse you in the process.
- Technical Analysis –
Many times when you are spot trading in cryptos by looking at historical price movements, you can identify a strategy where the prices of the coin are available at a lower rate. These strategies can help you when you buy or sell crypto for a short or long period. As investors or traders, it is vital to conduct such investigations and thereby enter the market at the right time. Many times when investors are trading in crypto with some amount of leverage in the form of extended line of credit from crypto exchange or bank, one needs to make sure one does complete DYOR because without such due diligence one can get burdened by the losses as well as the additional interest that needs to be paid on the borrowed funds.
- Running background checks on Founding Members –
Before buying crypto, one should conduct a thorough background check on the founding members of the coin. Most of the successful coins in the market today have been founded by people who had prior experience in this industry. Many individuals build coins just for their entertainment sake or to dupe other investors. Yet there are founders who come with vast experience in the industry. For example, the founder of the famous coin Cardano – Charles Hoskinson had immense experience building cryptos before inventing Cardano. Prior to inventing Cardano, Charles was a co-founder of Ethereum.
- Strong patrons in Social Media –
Good cryptos have solid social media engagement on Facebook, Twitter, Instagram, etc. A coin needs to have strong patrons who keep posting about new developments.
We have discussed steps that can help you complete the DYOR procedure. Let us explore why one should run the DYOR principle before buying crypto.
Why Is DYOR important as a concept?
- To Avoid Shilling –
- Sybil attacks –
Individuals create multiple counterfeit identities in a single node on the blockchain network to take control of the blockchain network. To outside users, such fake identities may seem like just one identity.
To avoid such attacks, an investor must choose an appropriate crypto exchange. It is crucial to trade or invest from secured exchanges that comply with government regulations and provide best-in-class service to their customers. One such exchange in India is Zebpay – India’s oldest and most trusted crypto exchange. Do check it out!