DYOR Explained: How and Why to Do it

eToro: Overall Best Stock App with 0% Commission

VISIT ETORO

X

Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees. 

If you’ve been in the crypto space for a while, you must have heard the slang DYOR or, in other cases, Do Your Own Research. The slang/phrase is common among crypto investors and is considered one of the most important aspects of crypto investing. 

Usually, DYOR is used to encourage investors to do due diligence before investing in a crypto project or initial coin offering (ICO) to avoid getting scammed. But how and why should you DYOR? We have all the answers in our DYOR explained article. 

Understanding the Importance of DYOR in Crypto

DYOR is not a secret slang or phrase. It’s an acronym used to encourage crypto investors – especially beginners – on the importance of researching and understanding a coin or crypto project before committing funds to it. 

At the same time, crypto enthusiasts, media platforms, and traders use DYOR as a caveat when publicly speaking about a project or sharing opinionated market analysis. That way, investors who listen to or follow their suggestions won’t hold them liable for their losses after investing. 

Shilling and rug pulls are on a high in the crypto industry. Shilling refers to promoting a coin to potentially cause a bullish trend that will increase its price, while rug pulls are crypto scams disguised as real projects to run away with investors’ funds. 

The best way to stay ahead of fake projects and inorganic bullish trends is to make informed decisions after conducting proper research – and this is where the phrase, DYOR, comes in. 

Why Relying Solely on Others Can Be Risky

Though the crypto market is massive, and numerous top voices, market analysts, and seasoned investors give insights and analyses, relying solely on others to make an investment decision can be highly risky.

For example, you probably have that crypto friend that tells you to buy one coin or advises you to invest in the best crypto presales  from time to time. Unfortunately, their predictions didn’t turn out to be the coin’s reality, and your investment didn’t 100x as they predicted. It’s not their fault or yours. You simply didn’t know better. 

When you rely on hearsay and other people’s opinions when employing the use of  trading platforms like commodity trading apps to invest, you’re taking a huge risk because you have no detailed knowledge of the project, its roadmap, and its potential. Instead, you may be investing in a shilled coin with heightened Fear of Missing Out (FOMO) from the project team. You may also invest in a fraudulent project and lose all your capital. 

Besides shilling and crypto scams, Sybil attacks are common in crypto-focused social media communities. These attacks involve fraudsters creating multiple clone accounts of popular crypto projects in the communities to trick investors into buying such coins. The duplicate accounts exist on a peer-to-peer network and are difficult to spot. So, investors relying on others for investment ideas may fall for malicious actors orchestrating Sybil attacks. 

Empowering Yourself with Knowledge

The best way to safely trade and invest in cryptocurrencies is by directly seeking knowledge and making informed trading and investment decisions. By employing various DYOR strategies, you’ll have more information to work with, thoroughly understand the project you’re investing in, and stay up to date with market trends and analysis. 

For example, instead of just investing in a meme coin because everybody is, you should take your time to understand the technology behind the coin project – its roadmap, use cases, the problems it aims to solve, and the unique selling points that help it stand out from similar crypto projects. All the information are usually available on the project’s official website and whitepaper. 

In addition, you can read about the project team and their experience, background, and track record. Successful crypto projects usually have a solid project team with adequate experience in the blockchain industry. 

Beyond the project’s use cases, exciting roadmap, and experienced team, what drives a coin’s value is its market sentiment. You can check a cryptocurrency’s market sentiments, price history, and other related information with analysis tools, charts, and social media presence to make reasonable price predictions before investing.  

That way, you’re more knowledgeable about the project, empowering you to mitigate risks and avoid potential losses when investing.

 Your capital is at risk.

What Does DYOR Entail?

With the initial understanding of DYOR, it may seem complicated at first. However, DYOR can be straightforward once you know what to do and where to seek information. We highlight what the process entails in the sections below.

Beyond Surface-Level Information

A coin or crypto project may have a good outlook from an average investor’s standpoint. However, this doesn’t always equate to adequate investment information. As such, a good investor must look beyond a project’s surface-level information on its website or social media platforms and seek more details before investing money. 

Some more detailed information to seek are the project’s real-world usage, what people say about it, its investment potential, possible risks, and how to diversify your investment portfolio with the coin and other assets. 

Comprehensive Analysis and Investigation

When doing your research, you can go a notch higher with a more comprehensive analysis and investigation. These include technical analysis using eToro ProCharts and trading tools like TradingView, and CoinMarketCap. 

With these comprehensive analysis tools, traders can investigate and understand a coin’s price history, tokenomics, current market sentiments, exchange listings, price predictions, and other information that can inform their investment decisions.

 Your capital is at risk.

Benefits of Conducting DYOR

With DYOR explained and a proper understanding of what it entails, what are the advantages of conducting DYOR in the crypto space? We highlight some of them below.

Making Informed Investment Decisions

Investing in crypto goes beyond gut feelings, advice from friends, following the bandwagon on social media and buying a coin due to FOMO. In fact, many new crypto projects thrive on driving FOMO among investors so they can buy their coins.

However, you can make informed decisions when you conduct DYOR before investing in any coin – no matter how popular it is. For example, when you have an in-depth understanding of a project, you know its potential and can infuse your knowledge of the general crypto market into your investment decisions.

Mitigating Risks and Avoiding Scams

The crypto market is volatile, and one of the significant risks of investing in cryptocurrencies is the risk of losing money due to price swings. Since price swings are part of blockchain technology, nobody can avoid them. The only thing you can do is hedge against volatility and manage risks. 

For instance, thorough research and analysis will show you the typical period an asset experiences high and low volatility. The information can then help you determine the perfect time to execute a trade or make investing decisions. 

You can also use risk management tools and strategies  such as day trading and scalping commonly found in day trading apps to reduce further the risk of losing funds when investing. 

At the same time, conducting DYOR before investing in a project is a good call, as it allows you to determine its legitimacy. With a detailed knowledge of the coin’s legitimate standing, you can avoid scams or rug pulls.

 Your capital is at risk.

Setting the Foundation for Research

There are various benefits to conducting DYOR when investing in crypto, but how do you begin your DYOR process and get it right? We explore what to do below.

Defining Your Investment Goals

The first step is to draft an investment plan or strategy with clear goals you intend to achieve after investing in a coin. You can only have expectations by knowing why and how you want to invest in a cryptocurrency, and your research is pointless.

You can split your investment goals into short-term and long-term goals. Doing so can create a strategy to help determine the coins with decent short-term returns and the assets to lock up in your wallet for long-term return on investment (ROI).

Identifying Your Risk Tolerance

No two investors are built equal – and the same can be said of crypto investment strategies. Due to volatility, cryptocurrency investing is a game of high risks and rewards. Some investors understand this concept and have developed a high-risk tolerance when investing. 

Conversely, some investors are risk-averse and prefer to invest little funds at a time. Whatever the case, it’s essential that you understand your risk tolerance levels and invest accordingly. And this is why your investment goals must replicate your appetite for risks. 

Evaluating Project Fundamentals

When doing your research, the best way to determine if a project is worth investing in is by understanding its fundamentals. Usually, a project’s fundamental analysis will answer crucial questions and help you know if it suits your investment plans. Some fundamentals to look out for are analyzed below.

Understanding the Project’s Purpose and Use Case

Nothing gives investors more clarity than a project’s use cases or utility. From a project’s utility, you can understand its unique selling points, the problems it aims to solve, and why investors may be interested in it.

Usually, a project with good use cases will gather organic interest among investors and stand the test of time. But a non-utility project may gather social media hype and still fail to deliver on its promised potential.

Assessing the Development Team and Advisors

Another way to determine a solid crypto project worth investing in is by knowing its development team and advisors. Legitimate crypto projects often disclose their founding teams’ identities, allowing investors to assess their skills, experience, and track records. 

Based on the information, investors can determine the project’s potential and chances of survival in the competitive crypto market. For example, Cardano was developed by Charles Hoskinson, one of the founders of Ethereum – the second-largest blockchain. The developer’s experience can influence some people to invest in Cardano (ADA).

 Your capital is at risk.

Analyzing Technological Aspects

Like your market analysis and research, your project research should exceed the fundamentals. For more informed decisions, you want to assess the technological aspects of the project since they are its operational bedrock. We highlight the technical research process below.

Reviewing the Whitepaper and Technical Documentation

As stated earlier, a project’s whitepaper contains all the information about it. These include tokenomics (demand and supply), project roadmap, use cases, market cap, community, etc.

These information can also be technical documentation on GitHub or other external sources for users and developers. Altogether, the project’s technicalities will inform its investors and community on what to expect in its developmental phase and beyond.

Examining the Project’s Blockchain and Protocol

Another technological aspect to consider during your research is the project’s blockchain or protocol. While popular cryptocurrencies like Bitcoin and Ethereum have independent blockchains, newer crypto projects are built on existing blockchains. For example, Ethereum hosts thousands of new crypto projects, including UniSwap and MakerDAO.

Such projects get more attention from investors because they leverage the popularity of robust, existing blockchains. However, projects with their proprietary blockchain and protocol may need more studying to determine their strengths and weaknesses.

 Your capital is at risk.

Exploring Multiple Sources of Information

You may need different opinions and views from multiple sources to gather valuable and accurate information about a coin or crypto project. For instance, you’ll find strong voices in the crypto space across digital and social media channels speaking on different coins to invest in. We highlight how to leverage these channels below.

Using Reputable News Outlets and Websites

Numerous crypto news outlets and websites provide market news, information about investment opportunities, the newest crypto projects or presales, and the overall market reality. For instance, websites like CoinMarketCap and CoinGecko provide data about different cryptocurrencies. Other platforms like Tradingplatforms and StockApps provide news on the latest presales and ICOs worth investing in.

An investor can leverage these sources for the necessary information needed for investing.

Leveraging Social Media and Online Communities

Time is of the essence in crypto investing. Investors can explore social media platforms and online communities to find the hot coins and projects to invest in on time. For instance, Twitter, YouTube, Discord, Telegram, and Reddit are popular social media channels offering information to crypto enthusiasts.

Distinguishing Between Facts and Hype

Not everything you read or hear in the crypto space is real. Here’s how to filter information and stick to the right ones.

Avoiding FOMO (Fear of Missing Out)

FOMO is a common concept in the crypto space. Many projects employ marketing and other tactics to hype their projects and make investors believe they may miss out on good returns. However, patience is vital in crypto investing, and you shouldn’t jump on every project before DYOR. It’s also okay to miss out on investments that don’t align with your strategy.

Verifying Claims and Announcements

Don’t take every announcement or big news hook, line, and sinker. Instead, verify that the news is true and the announcements are not fake. For example, some websites may spread fear, uncertainty, and doubt (FUD) among investors. Take big announcements with a grain of salt until you’ve done your findings.

Identifying Red Flags and Warning Signs

Since there are scams, shilling, and other things to be wary of, you want to stay ahead of such activities to avoid losing money. Here are a few tips to detect red flags in crypto investing.

Recognizing Unrealistic Promises

Any project that looks too good to be true is probably a sham. Avoid projects or websites with unrealistic promises or ROI, as they are likely fake or run as a ponzi scheme.

Scrutinizing Token Distribution and Presales

Another red flag to look out for is a project’s tokenomics and presale. Projects that allocate a large chunk of the entire market cap to developers are often operated by malicious actors. Similarly, projects without information about their token distributions are likely fake.  

 Your capital is at risk.

Incorporating DYOR into Decision-Making

The role of DYOR is to help you make better trading and investment decisions when trading cryptocurrencies or even when trading on demo accounts using paper trading apps. You don’t want to research for the fun of it. How can you infuse your research into your investment decisions? We review some ways below.

Using Research to Shape Your Portfolio

After completing your research, weigh all your options and opinions and find the ones that align with your trading and investment plan. That way, you can determine which coins to invest in and how to spread your capital across the assets.

Balancing DYOR with Other Factors

Getting the perfect strategy goes beyond conducting DYOR alone. Speak with more experienced traders, watch interviews and listen to podcasts from founders, and join a crypto community to build a more effective decision-making process. Don’t forget to check market activities while at it. 

Developing a Research Routine

To become a seasoned trader or investor, you must cultivate the habit of continuously conducting research and staying up to date with the market. Some steps to achieving these are;

Allocating Time for Ongoing Research

Ensure you research from time to time by setting time aside for DYOR. Since the crypto market runs non-stop, we recommend you conduct daily research to make timely informed decisions.

Staying Updated with Project Developments

You should also closely monitor the projects you invest in and other exciting projects to know the latest developments in their ecosystems. Doing so will help you see if the project still aligns with its roadmap.

Knowing When to Trust Expert Opinions

If you’re new to crypto trading and investing, you can use expert opinions and guidance as you go. These experts help beginners identify the right investment. Here’s how to go about it. 

Leveraging Expert Insights as a Complementary Source

Exchanges like eToro have expert guidance and investing tips to help beginners understand cryptocurrency investing. You will find a handful of tools, including copy trading, ProCharts, dedicated customer support, and expert trading advice to simplify your journey.

You can also speak with seasoned investors online and offline for more insights.

Avoiding Blindly Following Recommendations

While seeking expert information, filter the information you get instead of mindlessly following what the experts say. Always weigh the pros and cons before making an investment decision. 

 Your capital is at risk.

DYOR as a Lifelong Skill

As stated earlier, DYOR never ends in crypto. The market constantly evolves with new crypto projects and upgrades from existing ones. Here’s how to stay on top.

Continuously Improving Research Skills

The market dictates investors’ approach to research. In other words, you must continuously improve your research skills to meet market demands. Getting information from various sources can help with this. Similarly, you can mirror experts and conduct multiple analyses to know what works for you.

Adapting to Market Changes and New Projects

There will always be new crypto projects in the Web3 world. At the same time, the market will constantly evolve with time. It’s imperative that you align with the current market realities and understand new projects to up your DYOR game. 

DYOR Explained – eToro Complete Guide

Now that you have DYOR explained, including how it works and how to be a better crypto investor, you need to purchase cryptocurrencies to begin your investing journey. You can consider free stock apps like eToro that afford users low-fee trades without commission or deposit fees. Here’s how to get started with crypto trading after conducting your DYOR. 

• Visit the eToro website and click “Join eToro” at the bottom of the home page.
• Fill out the registration form with a new username, email address, and password.
• Check the consent boxes and click “Create Account” to complete the registration process. 
• Complete the ID verification by submitting proof of identity and address. 
• Deposit funds and start investing. 

DYOR Explained: How and Why to Do it – Conclusion

In this DYOR explained guide, we’ve touched on how to stay ahead in the volatile cryptocurrency market. With a sound investment strategy, you can mitigate risks, avoid scams, and make the most of your investments. However, remember that even the best research doesn’t guarantee investment success. 

On eToro, you’ll find 3000+ assets, including Bitcoin, Ethereum, and other popular altcoins, that you can trade and invest in with a user-friendly interface, the lowest trading fees, and 24/7 customer support. There are also trading tools like copy trading, ProCharts, and various educational resources to help improve your research skills when you start trading for free on eToro. 

 Your capital is at risk.

FAQs