Allinstation 
Understanding and analyzing what constitutes a sufficiently good and potential project are fundamental factors that a cryptocurrency investor must grasp to determine intrinsic value and development potential. Analyzing a project will help us make better investment decisions, thereby enhancing our investment journey. Let’s explore the typical criteria that form a good project with Allinstation.
Intrinsic Value of the Project
Intrinsic value is the real value that the project brings based on fundamental factors, different from market value, to assess whether the project is overvalued or undervalued. Fundamental factors include: the operating team, product, technology, investors, business model, financial indicators, development stage, tokenomics, business philosophy, community, market context, competitors…
Combining these factors to synthesize the story that the project is building helps us better understand the project’s potential and determine the best stage to invest.
Factors to Evaluate a Good Project
Project Idea and Vision
The first factor to consider is the project’s idea and vision. A project developed based on a novel idea and keeping up with trends will have a higher chance of success. However, not every new idea is good; it is necessary to evaluate whether the idea solves real problems and is feasible. If the project is a trend-following idea, consider short-term investment. Trend-following projects, when saturated, are often not highly valued due to a lack of creativity and short-term nature.
Example:
Solana’s positioning is a high-performance blockchain platform focused on speed. For a Layer 1 blockchain, the top priority is to have a large number of users participating in the ecosystem. Solana’s strategy is to use memes and build to attract dApps to build on the SOL network, exemplified by the Airdrop and launch of Jupiter, which has increasingly added utilities to this network ecosystem. It can be said that in 2024, Solana was very successful with the strategy of using memes to attract capital to the system, which is a very bold idea and has reaped much success.
Read more:
- Is the Solana Ecosystem Really Potential? (Part 1)
- Is the Solana Ecosystem Really Potential? (Part 2)
Product and Business Model
The product of the project must solve real problems and be feasible. It is necessary to study the project’s business model to understand the operation method and practicality, application, feasibility, novelty, and trendiness of the product. In crypto, projects with practical and breakthrough products and business models, such as DEX exchanges, are essential. When first launched, the features, business models, and technology of DEX exchanges like Uniswap solved the DeFi problem very well, leading to the birth of DeFi Summer.
However, there are also many successful case studies of a “ponzi” project model that still achieved certain success. However, the risk of investing in these projects is higher as ponzi develops very quickly but also declines rapidly, exemplified by the Luna – UST model. When launched, the community was very FOMO, but the loophole was very large, causing the FOMO to last only a short time and then fade. Currently, Restaking is considered a quite successful trend, but personally, I still sense a high ponzi smell. Therefore, understanding a business model, how it operates, what needs it solves, and whether it is sustainable is a decisive factor in evaluating whether a project is potential or not.
Read more: What is Restaking? Why can it create a high Ponzinomic model during a bull-run?
Example:
Research the project’s product to answer questions about the project’s goals, the problems the product solves, and the project’s feasibility. A typical example of a well-evaluated project is LINK, where the project’s product is about Oracle, a very important thing in Blockchain when LINK’s product is used by many other projects. Some projects may have a ponzi model like Luna, which created a high FOMO when offering users a very high APY at that time but did not account for the high price volatility of the market, which could cause Luna to no longer pay interest to users, leading to Luna’s collapse, dragging the entire market down in 2022.
Read more: Detailed Analysis of the “Collapse” of UST and LUNA
Economic Model (Tokenomics)
A project’s tokenomics must be clear, transparent, and demonstrate how the Token will be used and optimized. Factors to consider include:
- Token Allocation
- Token Utility
- Token Release Schedule
- Deflationary Mechanism
Since the token is what we investors will hold, and both the project and its investors, this is a game with many participants. Understanding tokenomics will help us know our position compared to other big players, know the stages to buy, and whether the token is being manipulated or held too much by one side.
Additionally, token utility is a quite useful part to observe. According to the supply-demand mechanism, when a token is in high demand for use, the more utility it has, the more it attracts users to buy to use the token, the higher the price will rise.
Example:
The tokenomics of Binance Coin with an initial total supply of 200 million BNB, a 5-year unlock period, and a token burn mechanism to reduce inflation, create price increase motivation, and retain investors. Another example is the SOL system, where the main utility of the SOL token is to buy and sell memecoins on the SOL system, and SOL has created a meme playground to pull money into SOL => demand to buy SOL increases => SOL price increases. At the same time, staking SOL to receive Jupiter airdrop at that time also caused SOL price to FOMO up high.
Community
The community is the potential customer base of a project. A large and loyal community is an important factor for sustainable development when supported by its own community. Observing how people interact with each other when talking about the project is a way to assess community quality. Having a good community also greatly supports the project’s media plans, as word-of-mouth marketing is very effective in crypto.
Example:
The most typical example of a community is memecoins, where memecoin cultures are formed thanks to the community supporting the project, believing in the project, and buying tokens, causing prices to skyrocket. BOME token is an example of having a strong community when, in just 3 days from the token fundraising, it increased more than 10 times and was then listed on top exchanges like Binance, showing how powerful the community is.
Or most recently, the scandal from Zk Sync’s airdrop, due to lack of transparency and unfair airdrop to users, caused the community to turn their backs on the project, leaving the ecosystem, causing activities on this ecosystem to drop sharply.
Read more:
- What is Book of Meme (BOME)? What made this Memecoin increase more than 10 times in just 3 days
- Activities on Layer-2 ZKsync Drop Sharply After Airdrop
Media and Communication
Media or community building is an important factor in project development. Creating a buzz and making people aware of a project is not enough; it also comes from how well projects do in encouraging users to participate in their campaigns. Good media and marketing will attract many users to the project, allowing it to grow even more. Projects can create buzz in various ways, typically through large fundraising, which is also a way for projects to create buzz, or through continuous appearances on media platforms and crypto communities.
Example:
Looking at recent campaigns like Backwoods, a GameFi project that made a big splash thanks to its attractive, simple gameplay, Backwoods did media very successfully when it was a storm and appeared a lot in GameFi communities, was mentioned by many people, and then even appeared on other web2 platforms like Tiktok with videos of users playing Backwoods.
Read more: What is Backwoods? What makes this hot game on Solana special
Project Valuation (FDV)
No matter how good a project is, how great the product is, or how strong the community is, the most important priority for us investors is to make a profit from investing. Therefore, the first thing is to value the project. We should look at the FDV index to get the most accurate valuation of the project, then combine it with the project’s capitalization + tokenomics + market timing to decide whether the current time is a good time to buy the token.
Valuation will directly affect our investment decisions. If the project is overvalued at a bad market time with unattractive tokenomics, it is clearly a bad decision to buy. The valuation of projects up to now is mainly determined based on the valuation of investment funds in the project and the “estimation” of other investors.
The price chart is what shows the effectiveness of project marketing. People often say, the price chart says it all. Observing the project’s price chart, we can know what the players in the game are doing, how they are treating this project, so that small investors like us can make decisions and follow. However, it does not mean a bad price chart is a bad project. A bad price chart is for us to observe and combine with other factors to decide whether this is the project’s strategy or not, to make a plan to buy or skip the project. For example, APT was once considered a project with a bad price chart when it halved, tripled from the peak, but then increased nearly 5 times from the bottom, users then no longer criticized but even returned to praise the project.
Example:
STRK is a Layer 2 Blockchain project. Valued by funds at an FDV of 8 billion dollars, when listed, STRK had a price around 2-2.5$, meaning an FDV of 26 billion dollars with a total supply of 10 billion tokens, a capitalization of about 2.3 billion dollars right at the time of listing + with STRK’s tokenomics of token inflation with a monthly token release always increasing => high valuation + inflationary tokenomics made buying STRK at that time unreasonable when the valuation was even higher than the investment fund.
Read more: Do projects with low circulating supply and high FDV have opportunities?
Development Team
The development team is a key factor determining the project’s success or failure. A strong team needs to have all the important positions and experience in the field they manage. Information about the development team can often be found through social media channels like LinkedIn, Twitter.
Example:
Some famous projects like PancakeSwap are said to be backed by Binance and CZ when they have been listed and integrated into some of Binance’s products, which makes us implicitly understand that PancakeSwap will be fully supported and is a project with development potential in the future when led by an experienced person.
Investment Funds and Angel Investors
A project funded by top investment funds has gone through a rigorous screening process. However, investors need to be aware of their position and the right timing. Not all funds are “good,” it is necessary to distinguish between long-term and short-term investment funds.
Example:
Alameda Research, FTX Ventures, Three Arrows Capital are the top investment funds of the previous bull-run cycle but have gone bankrupt.
Development Roadmap
The development roadmap shows whether the project is implementing the plan correctly and reflects the flexibility of the development team. A project with a clear roadmap and sticking to the plan is a good signal that the project is still active and has development motivation. Understanding the roadmap
Example:
A project with a changing roadmap but still keeping up with product updates is not necessarily a bad signal, showing adaptation to market conditions.
Operational Metrics
For projects that have been operational, operational metrics such as Market Cap, FDV, Volume, Transaction, TVL, Fee, Revenue, Fork, Github Commit are important measures reflecting the project’s operational efficiency.
Example:
These metrics can be found on statistical websites like CoinMarketCap, CoinGecko, DefiLlama.
External Factors (External Impacts)
Market Context:
Researching the market context helps evaluate the practicality and trendiness of the project’s solution.
Ecosystem – Functional Group:
Understanding the pieces in the ecosystem, the operating mechanism, and the importance of each functional group.
Competitors:
Researching competitors to identify the project’s differences and competitive advantages.
Basic Analysis Support Tools
List of some support tools: Messari, GoDeFi, project communication channels, Crunchbase, LinkedIn, CoinMarketCap, CoinGecko, DefiLlama, Dune, Token Terminal.
Read more: Top 20 Websites for Beginners (Part 2)
Conclusion
After researching the above factors, players can make judgments about the project’s potential and current valuation compared to actual value. Combine with other analysis methods to develop a suitable investment strategy. Hopefully, the above article has been helpful to you, thank you for taking the time to read!
