Due Diligence: The Importance Of Research And Analysis In Cryptocurrency Trading

There is no such thing as earning fixed returns when you are investing in cryptocurrencies. The best way to protect your investments is to upskill yourself with the knowledge to make an informed investment decision.

Due Diligence: The Importance of research and analysis in cryptocurrency tradingThe crypto market is flooded with a wide variety of choices with over 3,000 coins and tokens available, for finding best coins in the market, first of all you have to learn how to improve research skills. Therefore, there is always a propensity that you would make a hype-driven investment decision without gaining an understanding of the mechanics of the coins you are going to invest in. New investors, specifically, fail to grasp the underlying concepts of crypto trading.

Bitcoin prime shares some insightful tips that would help an investor to make informed decisions.

Importance of due diligence

Secure and safe trading. The basic design of cryptocurrency rests on the intention of providing an extra layer of security to its users, giving it an edge over fiat currency. The operations in blockchain technology prevent any interference from hackers and external disruptive factors, owing to its two-step authentication process on transfers. However, there are still some inevitable chances of penetration to some degree, making the transactional process go awry.

You must be fully aware of the potential risks while investing in the crypto sphere. Even the seasoned market participants, sometimes fail to make an educated decision, thereby falling into the traps of frauds and scams. It is overwhelming to see that the fraudsters blend into the arena so well that it is almost impossible to distinguish them out. Therefore, to reduce the susceptibility of any such incident, it is good to carry out exhaustive research before making a transaction.

Regulatory awareness Presence of regulatory bodies reassures that the fraudsters would ultimately be clamped down and that the defrauded investors will be appropriately compensated, and exemplifying the consequences for the wrongdoings. Particularly speaking of the intangible trade- digital coin trading, knowing your way to involve regulation at a suitable time and in an appropriate manner is vital.

Informed risk management Due diligence performed on various cryptocurrency platforms at the time to sign up could minimize the danger of losing out while making a financial transaction. IT is one of the most common risks made by investors that can be avoided by simply being alert.

Now that we are aware of the importance of due diligence, what parameters impact the investment decisions?

Transparency You should take enough time to establish the company’s contact details and address. A fake website would be impossible to track down over different platforms, failing its test of transparency. It is when you should refrain from such scams.

Data protection You need to be extremely cautious while handling your data. Only those cryptocurrency exchanges should be accessed that have an https website address and follow a two-factor authentication process for login. Also, you could use cold wallets for your deposits, instead of opting for hot wallets.

Regulation You must ensure that the cryptocurrency exchange you are opting for should come under the scanner of the relevant regulatory body, one that is permitted in the nation of your residence. For example, CFTC is the regulatory body for bitcoin exchanges in the United States, when a BTC is traded as a commodity.


Investing after making an informed decision about the coin’s true value, instead of simply following the hype, imparts the confidence, worth a lifetime, to carry out your own analysis.

Keep Calm, always do your research first. Reach out to as many communities as possible over the span of social media. Don’t make decisions in a haste, especially when it is tempting to invest in the soared markets! A good investment idea would last long enough while you make good and thorough research.