As the cryptocurrency world's most repeated and revered phrase, Do Your Own Research, often abbreviated as DYOR, is the closest thing crypto has to a golden rule.
In a nutshell, the DYOR philosophy seeks to create as many informed and well-educated cryptocurrency investors as possible.
However, despite seeming like a clear-cut commandment, it might not be readily obvious what DYOR truly means, and how to do it.
This article will demystify the DYOR process for you so that the next time a Redditor screams DYOR!!! — you'll know exactly what to do.
The Origins of Do Your Own Research
When Bitcoin finally emerged from the shadows of the Mt. Gox Bitcoin Exchange hack and subsequent cryptocurrency market crash, interest in the nascent digital asset started rising. Reddit forums, BitcoinTalk, and Twitter started seeing plenty of new faces discussing Bitcoin, Ethereum, and Ripple.
As the ICO craze started to kick in, so too did the sheer volume of people seeking cryptocurrency price predictions and Bitcoin investment advice. Naturally, there were many users on hand making convincing arguments about why you should buy X cryptocurrency.
But, it soon became readily apparent that many of those handing out advice were doing so to pump their own bags (increase the value of their investments by convincing others to buy the same token).
In effect, one Redditor would ask about the value or reasons that OMG token (or any other token) was potentially worth buying before dozens would chime with their analyses as to why token prices were due to skyrocket at any moment.
Sometimes these cryptocurrency price predictions came true, while many other times, users who invested in cryptocurrency tokens based solely on the advice of others lost money.
The irresponsibility of making investment decisions based on the advice of self-interested others gave rise to the notion that the only way to decide how to invest in cryptocurrency is to do your own research.
Cryptocurrency investors didn't coin DYOR, though. Academics, conspiracy theorists, and those who are too lazy to explain their rationale to others have long been telling others to do their own research. However, crypto investors are the first ones to turn the phrase into a principled mantra.
How to Do Your Own Research (DYOR)
The #1 reason you should do your own research is that ultimately, you can not trust the advice of others when it comes to investing in cryptocurrency, or anything else for that matter.
At the end of the day it is your money to win — but also your money to lose. The latter is obviously something you should work to minimize at all costs and doing so starts with educating yourself about your potential investment.
So, if you are looking to invest in Bitcoin or any other cryptocurrency, digital asset, or blockchain platform, you should start by doing your own research. Here is how to DYOR.
Identify potential investments
Do you know which cryptocurrency tokens and digital assets most appeal to you? Create a large list of potential investments that you will then use to create a shortlist later.
In deciding which cryptocurrencies make the list and which do not, first consider whether you can find a healthy amount of transparent information about the project. The more information you can find about a given digital asset, especially from independent sources, the better.
If, on the other hand, most of the information you find is either on the project's website itself or is from shaky sources that seem suspiciously optimistic about the project's prospects, then run in the opposite direction.
Create a list of investment goals
Next, create a list of investment goals. Are you targeting long, medium or short term timeframes for your investment? What is your appetite for risk? These are essential questions to mull over.
If you are looking for short term investments, then consulting cryptocurrency price charts will be more helpful than reading into project literature. However, short-term investments are on your to-do list, then make sure your aptitude as a day-trader is up to par for the task.
Medium and long term trades tend to have less risk involved, and are better for those with more conservative investment goals. While cryptocurrency investors love to talk about going to the moon, the reality is making outsized gains is rare, impossible to predict, and best left to gamblers.
Therefore, you should create a list of goals that will help you narrow your long prospect list into a shorter one by eliminating risky crypto projects that don't align with your values.
Decide how much you can afford to lose
This might seem counter-intuitive, but basically, decide how much money you can afford to lose. The other way to look at this is while losing money always stings, will the loss make or break your quality of life?
Don't invest your rent money, grocery money, or college tuition. In effect, approach your cryptocurrency investment with the mindset that you may lose it all — this will help you trim it down to an intelligent amount which, should it be lost, won't hurt more than it should.
Even world-class investors and traders rarely swing more than 1% of their total portfolio size into a new investment position, so act accordingly. Avoiding being over-invested will also help you keep a clear head about your investment choices since it reduces your emotional involvement.
Technical analysis is a form of research most beneficial to those entering shorter timeframe positions, but it can also elucidate and provide backing for long positions too.
Generally, when you think of doing research, it means looking into the cryptocurrency project team, roadmap, funding, and accomplishments to date. However, technical analysis doesn't care about those things at all.
Instead, TA is all about reading live cryptocurrency price charts to gather information about trends and deduce where markets might be heading. TA is a form of doing your own research that is hardcore analytic and far from objective, as it all boils down to how you use charting tools to interpret what the price trends are trying to indicate.
Learning to use technical analysis is immensely time-consuming but equally as rewarding when executed properly. If you are looking to stay in the cryptocurrency trading space for the long run, then learning at least the most basic technical analysis skills will benefit you greatly.
The yin to technical analysis' yang is fundamental analysis. FA is much closer to what anyone who has ever written a research paper in school are used to.
First, you identify a topic, then you gather sources about that topic and investigate them, then you create a conclusion about that topic that is guided by a prompt.
Fundamental analysis works much in the same way, except instead of receiving a grade, you might receive a handsome monetary reward for your well-executed research.
Make an informed decision
After spending a significant amount of time researching your cryptocurrency investment options, it is time to make decisions and subtract from your shortlist.
Remember, if a project is going to check out, they'll need all of the right ingredients. A stellar and capable team, powerful resources, and an achievable plan are all requirements for a project to succeed. There are additional factors, like having a proof of concept or all-start advisors, that can also greatly contribute to a project's success.
If, during the course of your research, you find a project ticks these boxes, then it will more than likely translate into a solid investment. However, in cryptocurrency trading, nothing is for certain, and even the best projects will often times flounder.
Resources for Doing Your Own Research
By now, you're probably ready to start doing your own research. Where to begin? Here are a few resources for researching cryptocurrency investments that will start you off strong.
- Binance Academy — An awesome tool for learning about everything blockchain
- Coursera — Blockchain and cryptocurrency courses for beginners
- CoinDesk — The latest cryptocurrency news and live Bitcoin prices
- ICO Drops — Historical price data for cryptocurrency ICOs
- The Block — An in-depth cryptocurrency journal rich in analysis
- TradingView — A social network for following crypto market price and chart views
With these resources in hand and good ol' Google, you'll be surprised at how much information you can soak up without ever having to land in a sub-Reddit or Telegram channel.
From now on, it is you who will be loudly typing at others to DYOR.