• Wed. May 22nd, 2024

10 Ways You Can Spot a Smart Crypto Investment

Even good ideas have the potential to backfire, but this still doesn’t defeat the fact that they were originally good ideas. At the same time, sometimes people get rewarded for their bad ideas or get lucky going into a crypto investment completely blind. 

This kind of survivorship bias creates a false narrative that nothing matters, that it’s all luck, or that there’s no such thing as a good or a bad idea. This is just not true. What we mean by survivorship bias is the fact that you’re more likely to hear stories about extreme outcomes simply because they’re more newsworthy. 


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After all, someone losing a minuscule portion of their investment money or someone gaining 2% of their net trading value on a single trade doesn’t have the making of a good story. Still, this is what the trading/investing experience is like for 90% of people. At least, this is what smart investing is like. 

However, what makes an investment smart? Here are ten factors that may help you answer this question. 

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  1. Thorough research

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The first thing you need to do when choosing where to invest is actually to conduct thorough research. Without research, it’s not a smart investment. Sure, it can still be a lucky one but never smart. 

To do this, you want to check their whitepaper and roadmap. If it’s a well-written whitepaper with a realistic and achievable roadmap, then what you’re looking at is a smart investment. Also, bear in mind that transparency makes all the difference. Omitting relevant information is never a good sign. 

  1. Competent management

The most important thing you must look out for is the people leading the project. Sure, sometimes it’s the people without renown in the industry, but even then, you can track their brand to see who you’re dealing with. Just look at their previous work history, which is easy to track today. 

Just go to their LinkedIn profiles, check out their public appearances and conferences, and go through the community to see their overall online reputation. Just remember that you can’t trust everything you see online. Take it all with a grain of salt.

  1. Market demand

The most important thing you need to figure out is whether there’s a market demand for your project? The first thing you need to do is market research. What is the use case (we’ll return to this a bit later to examine it in depth.

You also want to check the user base and community since the amount of public traction that the investment makes determines the interest. This is also why you seek social media, online presence, and news and media coverage. Remember that the court of public opinion drives the market. 

  1. Early adoption

There’s one well-establish but often-ignored rule in investing – once you start hearing about people making money on something, it’s probably already late for you to do so. The worst thing you can do is follow the market. You always lose money because you’ll always sell low and buy high.

Instead, you must find promising crypto presales or ICOs, find something you believe will grow, and invest. There’s so much information online; just click here to see some promising crypto presales in 2023. Just make sure to understand the risk. Speaking of which…

  1. Smart risk management

An investment can be smart and unsuccessful. You can think it all through, recognize some markers of success, and then miss something or have something unexpected occur. A smart investment is not always a profitable one. Successful traders set up stop orders to be profitable even if they have just 25% of successful trades.

The key is understanding the basic concepts of risk management and making decisions based on it. If you set aside a small portion of your investment funds toward a riskier investment, you’re in a position where you can gain a lot with a minuscule personal risk. Generally speaking, there’s nothing more important than risk management regarding investment. 

  1. Scalability

Everyone hopes an investment will grow in value; however, this is not what it means for an investment to scale well or be scalable. The point is that the business you’re investing in or the crypto you’re buying has the potential to reach a broader market.

Investing in a business that has the potential to go global and investing in a small local enterprise are not the same. Because crypto investments mostly have a transparent utility (something we’ll talk about in the next segment), it’s relatively easy to assess the scalability. While this does not indicate how well a token will perform, it can help you manage your expectations.

  1. Utility 

There’s a massive difference between the utility of cryptocurrency and fiat money. Sure, they are both used in payment, but crypto often offers special features like tokenizing assets, decentralization of finance, smart contracts, etc. The bottom line is that these functions (this utility) have an intrinsic value. 

By examining their intrinsic value, you can sometimes figure out how well the crypto token will perform. The thing is that this won’t be the case 100%. Does the best product always win? Of course not. Marketing and public attention are just as important (if not more important), and a good idea can sometimes go unnoticed. Still, good utility is always a plus. 

  1. Valuation

Valuation of the project is a difficult task. You need to:

  • Understand the purpose
  • Track development activity
  • Understand the tokenomics
  • Track supply
  • Track adoption 

Remember that cryptocurrencies are speculative and volatile. This means your valuation will never be 100% correct, and things may change rapidly. This doesn’t mean that it’s not worth doing either way. 

It’s also important that you get a good reference point. You can access historical data of similar tokens or see how it’s doing compared to its closest comparisons. Remember, you have no idea what you’re looking at without a reference point.

  1. Positive industry trend

Previously, we were a bit dismissive about following an industry trend. While this is not a good strategy for those looking to “trick the system,” it’s a decent idea. Still, it involves following market sentiment regularly because market sentiment can change.

Still, you must understand that a positive trend doesn’t last indefinitely. So, you must have an exit point that you will abide by. Ideally, you should even automate this to avoid a dilemma at the last moment. 

  1. 10.Community sentiment

It wouldn’t be the first time in history for mass hysteria to cause the market to crash or a token to surge. You see, crypto heavily depends on adoption and use cases. If people are unaware of something or don’t have a good opinion, they won’t use it. As simple as that.

At the same time, there’s also the social media effect of reach, where your reach grows exponentially when more people follow you. Overall, spreading the word, high public trust, and networking affect the asset’s value. This makes them worth keeping an eye out for. 

Before investing, make sure to think it through

No one can guarantee you’ll make money on an investment; however, if your process is sound, you’ll win most of the time. No one earns money with every trade, but you have a much higher chance of staying in the net positive with the right approach. 


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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.