)
What is the project’s purpose?
Understanding a project’s goals and relevance is key to evaluating investment opportunities. If the project seems unclear, irrelevant, or offers a subpar solution to a problem.
You’re on the right track if you can explain your investment rationale to a 12-year-old.
The fundamental analysis checklist can help you answer questions related to the project’s people, catalysts and weaknesses. Please note that this does not cover all aspects to be considered when performing a fundamental analysis.
Questions to ask about the purpose of a project
Can you explain what the cryptocurrency aims to achieve in one or two sentences?
Is it disruptive or innovative?
Does it solve an existing problem?
You can use platforms like Swyftx or CoinMarketCap to explore crypto projects.
)
Is the project an idea or a working product?
It’s crucial to recognise a concept from a functional product. Assess the development stage of the protocol and whether there is an established network, a functional prototype, a minimum viable product (MVP) or just an idea on a napkin (or whitepaper).
A viable product should be public-ready, with its mainnet operational for a significant period. Consistent updates and frequent user engagement, using dApps, smart contracts, etc., are indicators of product maturity.
Examples of projects to be cautious of:
A gaming project that has a trailer or graphics but is yet to have a playable game.
A new blockchain claims to revolutionise transactions but is yet to arrive at the testing stage.
A working product highlights a team’s capability to execute its vision. While many projects in crypto are built on speculation, this shouldn’t be the sole driver of value.
Questions to ask about the maturity of the project
What is its development stage?
Is there market demand?
Existing or rising demand for a cryptocurrency often indicates a greater chance of investment inflow. Naturally, more demand means more buyers and more potential for price growth.
Competitor comparison
Recognising the competitors of a project within its industry is crucial for assessing the project’s possibilities. While a project might appear attractive at first glance, its true standing comes to light when stacked against rival projects that potentially boast a stronger team, distinctive product attributes, influential partnerships or a more robust community involvement.
For instance, in Solana’s case, its biggest competitor is Ethereum, a more widely used layer 1 network with a greater security and infrastructure. Solana, however, offers a faster, more scalable solution.
Questions to ask about a product’s competitors
Who are the competitors?
What is the market cap of the top-performing competitors?
Evaluating user feedback
A glitchy platform or a lackluster interface is a red flag. Seeking user feedback from others can uncover potential weaknesses or flaws in the cryptocurrency’s design, functionality, or implementation.
Positive user experiences can drive adoption and value growth. If a project actively seeks feedback, it indicates transparency and a willingness to listen to the community.
Weighing strengths and weaknesses
You want to adopt a non-bias opinion throughout the research phase to provide a balanced viewpoint. Researching with rose-coloured glasses will mean you could oversee key information that could be detrimental to your process and the longevity of the investment.
It is recommended that while you are conducting research, notes are taken of any possible red flags as well as their strengths. Weak points might include:
Team members with dubious histories.
A token that has an abnormally high inflation rate which could dilute the price.
Token unlocks from early backers.
Poor response from the team around any issues in the community.
An unclear vision or irrelevant solution.
Test the product
Trialling the protocol’s/project’s user experience is akin to taking it for a test drive. Test a transaction, navigate their platform, or explore their app. This evaluation gives insights into its usability and functionality.
Factor in design, transaction speed, fees, security, and overall feedback.
A satisfactory user experience boosts the likelihood of market success, adoption and potential investment confidence.
Question to ask when testing the product
Are there any concerns when using the product?