Since the current period is in a bear market (bearish) phase, it is more difficult to profit from your cryptocurrencies. To bid on projects promisingHere are 5 indicators to look out for before investing in a bear market.
1. What does the project bring to the ecosystem?
Many projects promise worlds and wonders, and sometimes even features that have no practical application. Therefore, it is first necessary to satisfy the need for the project in order to interest investors. Therefore, we must ask ourselves the question of example of using the project in the real world. Will it bring something interesting and what can continue in the long run?
If the answer is no, all you have to do is read the new project’s white paper in the hope of finding a rare gem. On the other hand, if the project has specific use cases, we will see another criterion to meet.
2. How does the project differ from competitors?
The crypto ecosystem is a world full of projects of all kinds and competition is tough. Thus, the second indicator is how the project stands out from its competitors.
Does it bring real added value with features or a pale copy of what already exists?
In an ever-changing sector, if it doesn’t stand out or very little, it may never be valued at its fair value. If we take the case of decentralized exchanges (DEXs), today there are many such exchanges with similar functionality. Therefore, it is especially difficult to launch a project of this type without real added value.
3. How does the project generate income?
Whether it’s cryptocurrency or the real world, the person stays in the process or the work deserves to be paid. Therefore, the development of this type of project will require time and money.
Therefore, it is important that the protocol benefits from its work. Therefore, the purpose of this indicator is understand where and how the protocol will generate revenue build for the long term. As a rule, protocols do not use their own tokens, which will allow them to attract new users. Instead they will use buyback process buy and destroy (burn) them and ensure a certain stability of their assets.
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Therefore, you must provide a certain amount of economic stability for the project to be viable in the long run.
4. Roadmap (project roadmap)
A project roadmap will help define its goals and ambitions. The NFT project, which is going to release only one collection, has every chance of being forgotten in the next 2 years.
On the other hand, a project that has been carried out for several years with measurable and achievable goals much more promising. Therefore, it is important to give preference to projects whose roadmap is constantly evolving.
This demonstrates a certain motivation of the team to always want to go further.
5. Does the project have money?
A project that has funds is put on the market in the same way as an ordinary user. Therefore, it is important for him to know how to fix his profit and not have a single cryptocurrency in his wallet.
Also, owning cash may allow him to survive a bear market or turn to third parties for various reasons. It may also allow it to perform certain operations to expand the ecosystem more broadly.
It also gives an idea of how well the team’s funds are managed. A DeFi project that is too heavily exposed to certain cryptocurrencies is not necessarily a guarantee of success, and we were recently able to verify this with the fall of Terra.