How to Do Your Own Research (DYOR) and Its Importance

By Prachi Kothari
18 Min Read

Introduction

DYOR is a common phrase among crypto enthusiasts. The acronym stands for Do Your Own Research. It also means what it stands for. According to a report by Finbold, nearly 10.2% of the global population of 8 billion people invest in cryptocurrencies. It becomes crucial to do your research before investing in any cryptocurrencies. Do not blindly follow advice, trends, and news. This piece of advice is not limited to the crypto world alone. Keep this in mind for everything on the internet because misinformation spreads like wildfire. 

DYOR is a continuous process that includes analyses of various matrixes. Use social media to gather information and news and get community involvement. To learn about the coin’s history, read the whitepapers to know why team members created the project.

Read on to know more about DYOR and how to do it.

What is DYOR?

The idea behind DYOR is to empower investors to make informed decisions. Any new project or investment should involve significant research before investing. When researching a project, investors must look into many crucial areas. Some great starting points for research are the project plan, team members’ backgrounds and track records, past successes and failures, and community involvement. Cross-referencing important information from numerous reliable sources is a useful technique. Before investing, thorough research is required to evaluate a project’s feasibility and potential. 

Why is it important?

Repeated practice of DYOR would lead to responsible trading and disciplined thinking for minimizing risk. There are many reasons why DYOR is important. Some of them are:

Market sentiment: Human beings are emotional creatures. Even though many say that investment is backed by science, emotions play a significant role in moving markets. Some investors may get carried away by the buzz when the market rises and purchase assets out of fear of a possible loss. Traders can invest in an asset to avoid FOMO (fear of missing out). Investors are more likely to suffer financial losses if they don’t conduct thorough research before purchasing assets at premium prices. Here are some ways to beat the FOMO trap.

Similarly, when the market starts showing signs of weaknesses and there is social unrest, many investors may panic and sell their assets without conducting proper research into the situation. FUD (fear, uncertainty, and doubt) causes investors to sell due to the influence of commenters and investors on social media.

Shilling: To influence the price in their favor, persons who own cryptocurrencies frequently engage in “shilling” or publicizing their holdings. Sometimes, it can be challenging to tell a shill post from an unbiased one. To safeguard oneself from this, do not rely solely on recommendations from others.

Sybil: Facebook, Twitter, and Reddit are just a few social media sites where Sybil attacks are prevalent. People with bad intentions might swiftly set up numerous false accounts to deceive investors into buying a cryptocurrency based on a social media platform’s “popular” post. However, it is not always simple to identify fake accounts; therefore, exercising caution and conducting your research is crucial.

How to do DYOR?

Analysis, analysis, and more analysis

The point of doing research is to dig deeper into a project. Every research starts by analyzing the currently available data. Many types of analysis can be done for DYOR. They are:

Fundamental analysis

A FA evaluation approach determines the fair market value of an asset. Reviewing business procedures, whitepapers, roadmaps, development, marketing plans, teams, tokenomics, and network activity, is typically used. The fundamental analysis is crucial to determining a cryptocurrency’s value and viability in the crypto market. To fully understand the viability of cryptocurrency to make an investment decision also entails investigating and assessing the wider crypto sector and competitors.

Technical analysis

Technical analysis (TA), sometimes known as charting, forecasts future market behavior using historical price and volume information. While fundamental research tells you how much a cryptocurrency is worth, technical analysis shows you how to enter the market. Comparing and evaluating the price movements of the cryptocurrency you want to invest in is essential for knowing when to enter and quit the trade. You may perform technical analysis by examining cryptocurrency price charts, interpreting trends, indications, candlestick patterns, and more.

Sentimental analysis

As mentioned above, a significant market mover is sentiments. Sentimental analysis refers to analyzing the sentiments of traders. The cryptocurrency market has no law or institutional backing; the prices can change depending on human emotions, natural disasters, global crises, etc. In 2022, bitcoin lost more than 60% of its value, and Dogecoin lost 55%, making it a challenging year for investors. If there is no central body to regulate these markets, how do the markets rise and fall? The simple answer is human actions. A single tweet from Elon Musk sky-rocketed the prices of bitcoin.

FOMO and FUD, the two market sentiments, can force investors to overbuy or oversell. The circumstance may result in higher volatility and a high likelihood of you entering or departing a market at an inopportune time. While this has no impact on the value of cryptocurrencies, it does impact their price and, consequently, your investment. Therefore, a sentimental analysis must be done before investing in any cryptocurrency.

On-chain analysis

The on-chain analysis is used to assess the data on the blockchain ledger. The advantage of the internet era is that every piece of data can be used to tell more about human behavior. An on-chain analysis is used to assess the market sentiment using data on the blockchain ledger. Specifically, it involves examining transaction information and cryptocurrency wallet balances. These two factors are helpful when determining whether to invest or not. After all, it’s probably not a good idea to buy a token if it isn’t being exchanged by anyone and has a small number of substantial holders, or “whales,” controlling a significant portion of its circulating supply. 

Explore social media platforms

Social media has become a powerful tool for DYOR. It is the best starting point to learn about crypto. Social media platforms have given experts a direct communication channel with their audiences. This allows for a free flow of information. Check social media sites to see what experts and influencers are saying about the cryptocurrencies you prefer. But make sure the people you ask for help are impartial and have nothing to gain personally from your financial choices. You can also join a cryptocurrency community to meet other investors who share your interests.

Twitter

Getting in before the herd is a key part of crypto, which is why Twitter is essential. Filming and editing videos for YouTube takes time; hence the news that is released frequently lags a little. However, with Twitter, you can read real-time updates and the most recent news from initiatives and exchanges. Given how quickly the crypto space is evolving, this is frequently the best strategy for staying up to date with breaking news.

Look for Twitter users and tweets with many followers or likes. Type the $ symbol followed by the coin’s acronym (for example, $ADA) to search for fresh tweets about a coin you are interested in.

Reddit

Reddit is a major public crypto forum. On Reddit, you can ask questions and receive immediate responses from actual people. While people often push the coins they already own in these open forums, the upvoting system for comments allows you to gain valuable insight into a project.

Find out how active the community is on forums while evaluating a cryptocurrency for investing on Reddit. How many Reddit users follow the coin? Is the team able to effectively communicate project information? There is always a Reddit conversation about a coin if it has significant potential.

While doing DYOR using platforms like Twitter and Reddit, you should be careful about whom you believe. Though these platforms are great for gathering information and opinions, they can equally be harmful. These platforms have many opinionated users who are selling and ardently supporting their currencies to generate buzz about them.

YouTube

If you are a beginner and want to start your DYOR regarding a coin, start with YouTube. YouTube is an excellent platform despite having an abundance of affiliate marketers and click-bait titles. Their video formats help a more straightforward understanding of a topic due to the pictorial depiction. Some seasoned traders avoid YouTube, yet many excellent crypto channels offer a distinctive and somewhat time-sensitive look into current projects, market moves, and what to expect in the future. A YouTube search will provide several perspectives on the situation if there is a recent sharp rise or fall in the market.

Here are some suggestions for selecting YouTube content:

  • Prioritize users with a respectable number of subscribers, a solid reputation, and a respectable amount of well-informed, trustworthy, and urgent videos.
  • Pick those that exhibit a sincere interest in crypto and the underlying technology.
  • Pick a channel you enjoy watching! Crypto draws a diverse range of people, so you can be sure to find someone ideal for you.

White paper analysis

An official whitepaper presents a problem and explains how a product, technology, or token can solve it. Going straight to the source and reading a project’s whitepaper, website, and other marketing materials is a smart habit for traders and investors. White papers’ major goal is to emphasize the coin’s purpose, utility, prospects, and underlying technology, which all established and fundamentally sound projects will discuss.

This research’ initial step entails assessing the website of the cryptocurrency project. You should be able to get all the details and potential outcomes of a particular cryptocurrency project from it. However, white papers can be rather technical for the ordinary investor. It’s not a good sign when you finish reading a whitepaper with more questions than when you began. 

Research the numbers

Numbers don’t lie! Before investing, any savvy investor verifies the numbers, which is no different in cryptocurrency. Investors can learn much from the numbers surrounding the project and its digital asset. A reliable indicator of the level of popularity is the project’s social media and community channel usage statistics. However, watch out for bots and fake accounts. There are methods available to determine whether the follower counts on a social media account are accurate.

Many insights may be gained from market capitalization, circulating supply, asset price, daily active users, token holder distribution, total supply, and 24-hour trading volume. Investigating these figures allows you to assess the activities of other investors and users. When a project launches, many will reveal specifics about their tokenomics. These can specify the token distribution plan and the incentives for encouraging community involvement. 

Reputable voices

Thanks to the power of social media, everyone is an influencer these days. Every voice has a platform, and many people compete for attention by generating click-baiting headlines and an overdramatic analysis of cryptocurrencies. Choose your channels carefully as you would choose the crypto project. Wrong information can cause severe damage to your DYOR results.

Hire a professional financial advisor

Some people use experts to conduct market research and project analysis on their behalf. Although this outsourcing technique could help you save time and effort, you should be aware that you’re entrusting a third party to conduct due diligence on your behalf. According to experts, crypto investments should be at most 5% of the total portfolio. A financial advisor would help you get the correct blend of crypto and other investments.

Here are a few tips for your DYOR

  • Don’t believe everything you read as the truth: An important part of DYOR is not believing everything. There is a ton of cryptocurrency trading advice on the internet, but much of it is hype. Remember that many news pieces and overblown headlines are intended solely to generate clicks, buzz, controversies, and FUD. Take everything with a grain of salt; go to the experts before making up your mind, as the media thrives on sensationalism and scandals.
  • Don’t believe anything that is too good to be true. There is ton of misinformation available on the internet. Keep your mind alert at all times for questionable websites and information.
  • Take your time to understand an investment. Do not make hurried decisions. And, most importantly, do not make an investment that you don’t fully understand. Be interested in new projects and develop an interest in the technology that underlies them. It significantly increases the appeal of research.
  • DYOR is an ongoing process that you will get better at with practice: Given how fast the crypto world changes, continuous investigation and monitoring are necessary. Investors must be updated on important information, especially if they have invested in a lesser-known cryptocurrency. It will help you understand why prices fluctuate and predict whether your coin will see a pump or drop soon.
  • Trust your intuition and gut feeling: Your intuition is interwoven with your crypto knowledge. Your crypto sense will only get sharper if you take the time to learn what you’re getting into. If you’re serious about trading, this is a useful skill.
  • Lastly, it is your money, so it should be your decision alone. 

Conclusion

It’s crucial to remember that even the strictest form of DYOR cannot cure every problem. Due to the turbulence of the cryptocurrency markets, DYOR can only be used to evaluate the likelihood of a project’s success and gain a better knowledge of the degrees of risk involved. It does not eliminate the risk of a disastrous investment.

References:

Why and How to Do Your Own Research (DYOR) When Investing in Crypto | Binance Blog

How to do your own research (DYOR) in crypto

What Is Crypto On-Chain Analysis and How Do You Use it?

How To Do Your Own Research (DYOR) in Crypto