How to Vet Crypto Tokens Before Investing: 7 Tried and Tested Ways

Read any bit of advice to crypto investors and one thing you'll consistently hear is that you need to vet your crypto tokens before you buy them.

Investors are always advised to conduct thorough research on any crypto token before purchasing it. This is because, while there are valuable and promising tokens in the crypto sector, there are also many scam tokens and shitcoins. But how do you vet crypto tokens before investing in them? Newer investors, especially struggle to tell the good from the bad and it can all seem like a blur. Thankfully, there are tried and tested ways to find the most worthwhile tokens in the market:

As much as individual investors try to vet their crypto investments, this often pales in comparison to what crypto exchanges do before they list new tokens. From reviewing the product’s whitepaper to predicting its market viability, new cryptos are vetted intensely before being listed on major exchanges. This is why new listings on big exchanges can be an amazing way to find worthwhile tokens to invest in.

As Kane Pepi writes, Binance new listings can be a source of information for investors and many of these tokens often do well in the market. So, if you would rather someone else do the vetting for you, consider this.

The crypto investor community online is huge and includes everyone from newbie investors to seasoned veterans. They are a great source of feedback for any token you are considering investing in. By joining a crypto investor group on Telegram, Discord, Twitter/X, or any other platform, you can get the community’s opinion on different assets.

Not only will your fellow community members tell you whether or not to invest in a token but they will tell you why as well. This way, you know how to proceed with your investment plans and also become a more informed investor overall.

You’re not the only one who is curious about the different tokens in the market and wants to separate the wheat from the chaff. There are many crypto-focused publications that regularly post lists of the best tokens to buy at any given time. These include crypto in general and cryptos by niche such as meme coins and gaming coins.

Search the name of the crypto you’re interested in on respected crypto publications and see what experts think of them. Also, look at crypto recommendation articles to get an idea of what tokens are considered a good investment and why.

Crypto projects publish whitepapers to inform both investors and the general public about what they are about and why they are legitimate. In a crypto whitepaper, you can find information about the tokenomics, the roadmap, the underlying blockchain, and much more. One great way to vet a crypto project is to read its whitepaper and find out if it has any merit.

If a project’s whitepaper cannot provide concrete details on its token release plan, has no use cases cited, and is unclear about its planned roadmap, it might not be a good project to invest in. Ideally, you should walk away from reading a whitepaper more confident than before.

If you struggle with vetting the crypto project itself, you can always opt to vet the team behind it instead. A look at the website or whitepaper will show the people behind it and from there, you can begin doing your research. Ask yourself if these people have been behind successful blockchain projects in the past and have a positive reputation in the industry. Also, what is their professional background? Have they worked in the tech industry for a long time with successful outings to their name?

If the founders’ background is shady or you can’t find any information about them, it might be a sign to approach with caution.

One of the most basic questions you should ask yourself before investing in a crypto coin is about its use cases. A crypto’s use cases will dictate how much demand there will be for it and thus, how much you can profit from it. XRP is used for cross-border transactions, and Ether is used for DeFi and NFT transactions, which are some of the sources of their success. Try to summarize what the tokens’ use cases are and this should tell you whether or not to invest.

And while there are some cryptos that have found success despite having no use cases, this is quite rare.

While this is not a hard and fast rule, a token’s previous market performance can give you an idea of whether or not it is a viable investment. Has the token been in the market for a long time? Has it seen steady growth for years and built a passionate community? If so, it could be a sign that the token has long-term potential and isn’t a flash-in-the-pan. In a crypto sector full of hyped tokens that fizzle out quickly, projects with continued success are a good sign.

The crypto market boasts thousands of different tokens and not all of them are good. That is why investors are encouraged to vet all the tokens they are considering buying. In this article, we break down the different ways to research a crypto token and decide whether it is a promising investment