Research and Due Diligence

Investment Strategies: Research and Due Diligence

🎯 The Treasure Hunter’s Guide to Crypto

Imagine you’re a treasure hunter. Before digging anywhere, smart hunters:

1. Study the map (Risk Assessment)
2. Check if the treasure is real (Due Diligence)
3. Track their discoveries (Portfolio Tracking)
4. Measure the gold quality (Token Metrics)

Let’s learn how to become a crypto treasure hunting expert!

🛡️ Risk Assessment Frameworks

What is Risk Assessment?

Think of buying crypto like crossing a river. Before jumping in, you ask:

• How deep is it? (How much can I lose?)
• How fast is the water? (How quickly do prices change?)
• Are there rocks? (What hidden dangers exist?)

A Risk Assessment Framework is your checklist before crossing any river.

The 3-Layer Risk Check

graph TD
    A["🎯 Start Risk Check"] --> B["Layer 1: Project Risk"]
    B --> C["Layer 2: Market Risk"]
    C --> D["Layer 3: Personal Risk"]
    D --> E["✅ Decision Made"]

Layer 1: Project Risk

Ask yourself:

• Team: Who built this? Are they real people?
• Code: Has anyone checked if the code works safely?
• Purpose: Does this solve a real problem?

Example:

Before buying “SuperCoin,” you discover the team is anonymous and the code was never audited. 🚩 Red flag!

Layer 2: Market Risk

• Volatility: Does the price jump up and down like a kangaroo?
• Liquidity: Can you sell it when you want to?
• Competition: Are there 50 other coins doing the same thing?

Example:

A coin with $1,000 daily trading volume means you might get stuck. You can’t sell 10,000 coins easily!

Layer 3: Personal Risk

• How much can you afford to lose? (Never invest rent money!)
• How long can you wait? (Weeks? Years?)
• How will you feel if it drops 50%?

Simple Risk Score Card

Rule of Thumb: If total score < 12, think twice! 🤔

🔍 Due Diligence Process

What is Due Diligence?

Imagine buying a used bicycle. Would you:

• Just hand over money? ❌
• Or check the wheels, brakes, and chain first? ✅

Due Diligence = Checking everything before you buy.

The 5-Step Detective Method

graph TD
    A["🔍 Step 1: Read the Whitepaper"] --> B["🧑‍💻 Step 2: Research the Team"]
    B --> C["💻 Step 3: Check the Code"]
    C --> D["👥 Step 4: Study Community"]
    D --> E["📊 Step 5: Verify Numbers"]

Step 1: Read the Whitepaper

The whitepaper is like a recipe book for the project.

Look for:

• What problem does it solve?
• How does it work?
• What makes it special?

Red Flags:

• Copied from other projects
• Too many buzzwords, no clear explanation
• Promises of guaranteed profits 🚩

Step 2: Research the Team

Good Signs:

• Real names and photos
• LinkedIn profiles you can verify
• Past successful projects

Bad Signs:

• Stock photos as team pictures
• No online presence
• Claims of “working at Google” but no proof

Example:

You search “John Smith CryptoProject” and find nothing. No LinkedIn, no Twitter, no history. Time to walk away! 👋

Step 3: Check the Code

You don’t need to read code yourself!

Ask:

• Is the code on GitHub (public)?
• Has a security company audited it?
• When was it last updated?

Trusted Audit Companies:

• CertiK
• OpenZeppelin
• Trail of Bits

Step 4: Study the Community

A healthy project has:

• Active Discord/Telegram groups
• People asking real questions
• Developers answering honestly

Warning Signs:

• Only “moon!” and “rocket!” emojis
• Questions get deleted
• Fake followers (easy to spot: no real conversation)

Step 5: Verify the Numbers

Don’t trust—verify!

📊 Portfolio Tracking Tools

Why Track Your Portfolio?

Imagine owning 10 jars of candy in different rooms. Without a list, you’d forget what you have!

Portfolio trackers show all your crypto in ONE place.

Top Free Tools

1. CoinGecko Portfolio

• Best for: Beginners
• Features: Price alerts, simple charts
• Cost: Free

2. CoinMarketCap Portfolio

• Best for: Quick overview
• Features: Watchlists, news feed
• Cost: Free

3. Delta App

• Best for: Mobile users
• Features: Multiple portfolios, beautiful charts
• Cost: Free (premium available)

4. Koinly

• Best for: Tax reporting
• Features: Automatic import, tax reports
• Cost: Free for tracking, paid for reports

What to Track

graph TD
    A["📊 Your Portfolio"] --> B["💰 Total Value"]
    A --> C["📈 Profit/Loss"]
    A --> D["⚖️ Allocation %"]
    A --> E["📅 Purchase History"]

Pro Tip: The 5-5-5 Rule

Check your portfolio:

• 5 seconds: Is total up or down?
• 5 minutes: Any big changes?
• 5 days: Weekly review for rebalancing

Don’t check every hour! It causes stress and bad decisions.

📈 Token Metrics Platforms

What are Token Metrics?

Metrics are like a report card for crypto projects.

Just like students get grades (A, B, C), tokens get scores based on:

• Technology: Is the code good?
• Team: Are the builders trustworthy?
• Tokenomics: Is the coin supply fair?
• Market: Is there real demand?

Key Metrics Explained

1. Market Cap

What it means: Total value of all coins

Formula: Price × Total Supply = Market Cap

Example:

1 million coins × $10 each = $10 million market cap

Categories:

2. Fully Diluted Valuation (FDV)

What it means: Value if ALL coins existed today

Why it matters: Shows future selling pressure

Example:

Current supply: 10 million coins at $1 = $10M market cap Maximum supply: 100 million coins FDV = 100M × $1 = $100 million

If FDV is much higher than market cap, more coins will enter the market!

3. Trading Volume

What it means: How much is bought/sold daily

Healthy sign: Volume at least 1-5% of market cap

Example:

$100M market cap with $500K daily volume = Good $100M market cap with $10K daily volume = Warning! 🚩

4. Token Distribution

What it means: Who owns the coins?

graph TD
    A["Token Distribution"] --> B["Team: 15%"]
    A --> C["Investors: 20%"]
    A --> D["Community: 40%"]
    A --> E["Treasury: 25%"]

Watch for:

• Top 10 wallets holding 80%+ = Danger!
• Team tokens locked for 2+ years = Good sign

Best Token Metrics Platforms

The Quick Health Check

Before investing, score each metric 1-5:

Total Score Interpretation:

• 16-20: Strong fundamentals ✅
• 12-15: Acceptable, monitor closely
• Below 12: High risk, reconsider 🚩

🎓 Putting It All Together

Your Research Checklist

Before ANY investment:

1. ✅ Risk Assessment - Used the 3-layer check
2. ✅ Due Diligence - Completed 5-step detective work
3. ✅ Tracking Ready - Added to portfolio tracker
4. ✅ Metrics Checked - Verified key numbers

The Golden Rules

1. Never invest more than you can lose - Crypto is risky!
2. Research before FOMO - Fear of Missing Out causes losses
3. Track everything - Know your true performance
4. Update regularly - Projects change over time

Remember the Treasure Hunter

Every successful crypto investor is like a careful treasure hunter:

• They study maps (research)
• They test the ground (due diligence)
• They keep records (tracking)
• They measure value (metrics)

You now have all the tools to hunt wisely! 🏆

Quick Reference

Happy researching! May your investments be wise and your due diligence thorough. 🚀