How to Research Cryptocurrency Tokens Before Investing
With the increase in the popularity of cryptocurrency and the introduction of fast and low-cost blockchain networks like Binance Smart Chain (BSC), the number of tokens launched on various blockchains has skyrocketed. The vast majority of these tokens are either worthless meme coins created by newbie developers looking to cash in on the cryptocurrency craze or scam coins created by fraudulent developers looking to fleece unsuspecting investors. Even among these shitcoins and scamcoins, there are some hidden treasures that will repay early investors hundreds or thousands of times over. In the cryptocurrency world, there is a “gold rush” going on, where a good pick can turn a single person into a multi-millionaire overnight.
So you’ve discovered a low-cap altcoin in its early stages and are considering investing in the hopes of becoming a millionaire like the Dogecoin millionaire you read about. So, should you go ahead and invest, even if only a little? Absolutely not; you must conduct extensive research to determine whether the new token has a genuine chance of growing. The number of shitcoins and money lost in them is far greater than a few odd guys making some money, and you are very likely to lose your investment as well. To avoid a rugpull, you must consider token fundamentals such as supply, privileges, the possibility of it being a honeypot, whether owners can mint more supply and dump it, liquidity, and whether it is locked. These fundamentals of each coin are all available on the Blockchain and Smart Contracts, but manual research takes a long time. You would spend hours and hours on each token before deciding they were unsuitable for investment, or you would make bad decisions. You will eventually become disillusioned and lose interest in dabbling with crypto assets.
There is a new Dapp that makes token research simple and quick. Mudra Research provides the most comprehensive and advanced token research tool available. You can learn everything you need to know about any BSC token in seconds, including all of the critical fundamental parameters listed below:
A renounced token (one whose contract ownership has been assigned to a burn address) indicates that the owner has given up any special privileges. If the owner has privileged access, they can commit fraud such as prohibiting selling when there are enough investors by changing the token configuration.
Token Burn Percentage
This percentage represents the decrease in total token supply caused by a transfer to a burn address (Burn addresses are typically 0x00..0 or 0x00..dead addresses that have no keys and cannot swap tokens). A reasonable percentage (30-50%) of tokens burned is a good indicator because it reduces a developer’s ownership and reduces the likelihood of a dump.
The presence of a verified contract, i.e. the source code being published on a blockchain explorer, speaks positively about the token’s potential. It enables users to understand exactly what smart contracts are doing and to audit them.
The owner can continuously mint and dump tokens due to an inexhaustible supply. By scanning the smart contract code, Mudra Research confirms that the token can be minted. Any token that can be infinitely minted should be avoided.
Honeypot Tokens with such mechanisms, also known as honeypots, are common scams and are most emphatically not crypto gems. You will, on the other hand, lose your entire investment.
Liquidity Pool Value
One of the most important indicators of a good growth potential token is the value of its liquidity pool.
To allow trading on a decentralized exchange (DEX) such as PancakeSwap, a liquidity pool must be built. High-value liquidity pools represent an investment and commitment on the part of the developers, and as a result, they are likely to grow in the future.
Liquidity Pool Token Allocation
The allocation of “tradable” token supply to liquidity pools is frequently overlooked. After releasing a token, developers obtain complete ownership of the entire supply. They can burn a limited number of them, airdrop more, or do some pre-sales before the launch. Nonetheless, they would normally retain the lion’s share of the tradable supply. To improve the appearance, they may distribute it across multiple wallets with no whale visible in the holder’s list. However, if a large portion of the supply is committed to the liquidity pool, the developers are less likely to have a larger share, reducing the likelihood of a token dump.
As we saw in previous metrics, a high value and high allocation liquidity is a good place to start. However, the next critical metric is whether or not the liquidity is locked. The liquidity must be locked as a minimum guarantee of no rugpulls, in which developers withdraw liquidity from the DEX and flee with the funds. Developers would lose their right to cash out their holdings if they locked their liquidity tokens in a timed locker.
This information is the most difficult to find on your own, and you must frequently rely on the developer’s word for it. Mudra Research, on the other hand, is the world’s first research tool that automatically scans all well-known BSC LP lockers. Mudra Research will tell you how much token liquidity is locked, as well as list all the lockers with links.
Locked liquidity time
Another critical indicator of a high growth potential token is the percentage of liquidity that will be locked even after a year from now. Long duration locked liquidity ensures that there will be no near or long-term rugpulls and that investors will have enough time to come on board and stabilize liquidity and holdings.
With Mudra Research, you can now research and identify up-and-coming crypto gems before anyone else, and who knows, you might even end up on the cover of a magazine as the latest rags-to-riches crypto success story.