SendCrypto: What you need to have in mind before investing in a project during the red-candles period

The bull market is not just increasing the crypto gains! It also increases the bro-experts! But when it comes to a bear market, only a few people know how to still invest in crypto!?

Here are some thoughts* to consider before jumping into a project:

Bear markets in cryptocurrency deplete portfolio value, and they have a deadly tendency to go longer than anyone thinks. One of the silver linings of market-wide pullbacks is that it allows investors to refocus and spend time examining ventures that could succeed if the trend reverses.

Consider the following five variables when deciding whether or not to invest in a crypto project during a bear market.

Is there a good use case involved?

In the crypto world, there are lots of flashy promises and odd methods, but when it comes down to it, only a few companies have created a product with demand and utility.

One of the most crucial things to consider while considering whether or not to preserve a token is “Why does this project exist?”

If there isn’t simple response to that issue, or if the protocol’s answers don’t actually tackle a pressing problem, there’s a good risk it won’t get the long-term adoption it needs to survive.

Find at least one competitive edge

In circumstances when a valid use case exists, it’s critical to assess how the protocol stacks up against other initiatives that address the same problem.

Is it a better or easier solution than its competitors, or is it just a redundant protocol that doesn’t add anything new to the table?

The oracle market, which has seen a handful of protocols developed over the last three years, is a good example of unneeded redundancy. Despite the expanding number of possibilities, Chainlink (LINK) remains the most widely integrated oracle solution and the strongest contender in the field.

How the protocol makes money, if it does?

“If you build it, they will come,” is a truism in technology circles, but in the cryptocurrency space, it doesn’t always transfer into real-world adoption.

Because running a blockchain system costs time and money, only those with enough revenue or funding will be able to survive a bear market.

Investors interested in buying decentralized finance (DeFi) tokens can use this information to determine whether a project is profitable and where the revenue comes from.

If a project has low activity and revenue, it’s time to consider whether it’s undervalued or a risky investment.

Any backup cash bags?

Every startup should have a war chest, treasury, or runway since it’s critical to determine whether the project has enough finances to weather downturns before investing, especially if giving yield on locked assets is the major motivation for drawing capital.

As previously said, running a blockchain protocol isn’t inexpensive, and the majority of existing systems may not be liquid enough to withstand a prolonged bear market.

A DeFi-style project should ideally include a huge treasury with a variety of assets such as Bitcoin (BTC), Ether (ETH), and more stablecoins such as USD Coin (USDC) and Tether (USDT) (USDT).

It’s critical to have a well-funded and diverse treasury that can be accessed during difficult times, and as Strawberry Sith points out, projects must learn when to take profits and not leave the majority of the protocol’s treasury in Ether or the platform’s native token.

Are they delivering as promised on the roadmap?

While previous performance is not always indicative of future results, a project’s track record of adhering to its roadmap and reaching critical milestones can provide vital insight into whether it is ready to face adversity.

Sites like CryptoMiso and GitHub can let investors peer behind the curtain to check the frequency of development and developer activity for a protocol, in addition to keeping track of roadmap milestones.

If a team shows little to no work as roadmap deadlines approach, it’s important to assess whether a slow rug pull is taking place and it’s time to get out before more losses are realized.

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*the content of this article does not contain any financial advice or guidance on investments. Readers should conduct their own research prior to making a decision. The article reflects the author’s opinion and thoughts that might be completely different from any other person.?