What to Look for When Investing in Crypto Tokens

Things to Look for When Investing in Crypto Tokens
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Stay informed, stay safe and earn passive income

You can buy cryptocurrencies and crypto tokens with your credit card, through bank transfers or by swapping other crypto, but what do you need to know before investing? Trading crypto is a whole different ball game, as you need to read charts. But there’s some basic research you can do before investing in crypto tokens to ensure you don’t get burned.

Some people throw money against the wall in the hopes that it sticks. But smart investors at least know what they are investing in. Smart investors understand the market, know the technology and see the trend.

Cryptocurrencies are one of the most lucrative asset classes in the world at the moment. Big tokens like Bitcoin and Ethereum have been around for less than two decades and increased their value by more than 350,000%.

However, cryptocurrencies can be just as risky as they are profitable. Investors have lost their life savings speculating on blockchain tokens, and newcomers should proceed with caution when investing. 

Check this before investing

DappRadar offers the Token Rankings, a nice way to find new crypto tokens to invest in. But before you invest in a token, these are some tips to make sure you know what you get into.

Token utility

When you want to invest in a token, it’s good to know about the utility of the cryptocurrency. The more you know about the project, the better you can understand whether it will have a future increase in demand. The more use-cases a token has, the bigger the chance that others will want that token too. In addition, it’s also good to look at the project’s treasury management and the token’s economics, also known as tokenomics.

Community and whales

Every Web3 project needs a community of builders, enthusiasts, traders and content creators to have any significance for investors. Without a community there’s no need to invest in a token. Therefore it’s always good to look at social media accounts, for example X and Discord.

However, community in Web3 goes beyond social media. Through block explorers like Etherscan, you can find out how many token holders there are for a project. In addition, you can discover the power whales have over a token. When 80% of the token supply is in the hands of 5 whales, then that’s a serious red flag.

In addition, tools like BubbleMaps have been popular to analyse the token distribution of a project.


Investing in a project where the developers are basically anonymous, should be considered a red flag. Even more so when there’s hardly any communication at all. A website and social media accounts can be created with a few button clicks, but reputation really goes a long way.

Before you invest in a project and purchase cryptocurrencies, you will want to make sure that the people behind a project are legit. Have the developers been active on Github? What projects did they work on in the past, and in what kind of role?

Leave no stone unturned, and make sure to consult all their social media, Github and Codebase contributions, and past projects. If the developers behind a token are anonymous, tread with extra caution. There are limited ways of tracking them, and there will be no way of getting your money back in the case of a rug pull.

This doesn’t mean that every anonymous project will fail, but when you’re investing serious money, you also need a certain level of safety.

Trading volumes and liquidity

When you invest early in a token, you are taking a serious risk. Any cryptocurrency without a reputation comes with a risk. As an investor you can do your due diligence by looking at the current trading activity for a token. For example, you can check out the circulation market cap, and also take a look at the fully diluted value (FDV). Then you can look at the trading volumes, and the available liquidity on exchanges.

More available liquidity means that trading doesn’t impact the price that much. This then helps the trading volume. Investing in tokens with a small market cap can be very lucrative, but also comes with a risk. Finally, it’s important to compare the circulating market cap with the fully diluted market cap. When the circulating supply is much lower than the FDV, more tokens may unlock at some point. This could have a negative impact on the price action.

Through the Token Rankings on DappRadar you can find most cryptocurrency tokens on the market. From there you can click a specific crypto token, and dive into the market cap, FDV and other token metrics.

Never invest more than you can lose 

Even while doing your research, there’s no such thing as guaranteed profit. Trading crypto is incredibly risky, and we advice everybody to only invest the money than you can lose.

Crypto markets are driven by market sentiment, product development and government regulations. Each of these can heavily impact the price, and even the most fundamental analysis can’t predict a government illegalizing crypto.

Spread your risks across a couple of cryptocurrencies, and don’t invest all your money. Do your research, never simply trust to word of another, and when something is too good to be true… it probably is.

Explore crypto tokens at ease

If you want to have a wide perspective of the Web3 and crypto industries, DappRadar is the place to go. Check out the Top Crypto Tokens Ranking in order to keep up with this ever-changing market.

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