The cryptocurrency landscape is constantly evolving. What started out with more commonly known coins such as Bitcoin and Ethereum has evolved into over 20,000 different variations of cryptocurrency. While each is available to trade, our crypto tax CPAs highly recommend doing sufficient research to understand the value proposition of each before investing. In fact, there are many cryptocurrencies that have no utility or value. 

If you’re interested in learning more about researching and trading new crypto coins, here’s what our team at Founder’s CPA recommends.

Metrics & Guidelines to Validate Before Investing

Check the Whitepaper

First, look for a whitepaper, or document that outlines the purpose, vision, and philosophy of the coin in which you’re interested. These are typically published at the launch of a coin launch to attract investors. Each whitepaper will outline the purpose, utility, timeline, supply, how it works, and more. If you’re unable to find the whitepaper or you aren’t sure whether it’s legitimate, it’s best to hold off on your investment. 

Locate the Project’s Activity

Generally speaking, not all active projects are reliable, but the activity is a good indication of the coin’s surrounding activity. For example, you can research social media platforms such as LinkedIn, Twitter, or Instagram to see if the crypto has any active handles. When was the last time that the account posted an update? How many followers does the account have and what is the engagement on the account like? Looking into both the community and developer activity is another good indicator. The coin’s enthusiasts will flock to the community via platforms like Slack, Discord, or Telegram. If you’re unable to locate any trading or developer activity, this is a red flag. 

Check Sources & Use Cases

The right research is key to helping you understand the legitimacy of a coin. Make sure to double-check the sources that you’re utilizing to make sure that they’re legitimate. For example, is the site properly edited? What is the language like on the overall site? Is the content easy to understand and who is the author? Look out for information that is biased; companies should be aware of both strengths and shortcomings when presenting information to the public. 

Building Your Investment Plan

While the internet is an effective resource for finding new and legitimate cryptocurrency investments, don’t rush into anything. Searching for a project’s online presence and ensuring it’s legit can save you frustration (and money) in the long run. As crypto is a volatile digital asset, it’s always best to do your research beforehand. If you’re interested in learning more about how cryptocurrency can benefit you but you’re not sure where to begin, this is where our team can step in and help.

See How Our Crypto Tax CPA Can Guide You

At Founder’s CPA, we have a team of experts and accountants who can guide you or your business in the right direction. We have a deep industry knowledge of cryptocurrency accounting and taxation, and we’re happy to help you understand the ins and outs of your investments. Take advantage of our free consultations to get started.

Curt Mastio
Post by Curt Mastio
Jun 7, 2023 2:00:00 PM
Curt Mastio started Founder’s CPA in 2017 and currently serves as the Managing Partner of the firm. After obtaining both his Bachelor’s and Master’s degrees in accounting from the University of Illinois in Urbana-Champaign Curt started his career in Big Four public accounting. Shortly thereafter Curt served as the Chief Financial Officer of Storage Squad began his stint as an Adjunct Instructor at Northwestern University’s Farley Center for Entrepreneurship and has been teaching Accounting & Finance to undergraduate students for 6+ years. In his current role Curt oversees strategy, operations, and business development at Founder’s CPA. Further, Curt has experience working directly with 200+ startups and small businesses providing accounting, tax, and outsourced CFO services. His industry expertise lies in the SaaS, Blockchain, Marketplace, and Fintech industries. He has served as a key advisor working directly with startups that range from pre-revenue to companies generating over $30 million dollars a year in revenue. Lastly, he serves a key role working directly with the firm’s clients that have collectively raised over $200 million in venture capital funding to date. Curt is also an active advisor, mentor, and investor in the startup ecosystem. He has facilitated numerous workshops, webinars, and presentations to incubators and other startup-centric organizations. He is also an active mentor for Techstars in both Chicago and Iowa. Outside of his daily professional duties Curt is actively involved with Beat the Streets Chicago and was a founding member of its Young Professionals Board. His efforts in both leadership and community involvement were recognized when he was awarded the Illinois CPA Society’s Outstanding Young Professional Leadership Award in 2020. He was also a panelist at their annual conference in 2022 where he spoke about his experiences starting and operating a public accounting firm. He maintains an active Certified Public Accountant designation that he obtained in 2014. Outside of work, Curt can be found spending time with his friends & family including his dog Rufus. His hobbies include golf, boating, cooking, reading, and attending sporting events & concerts.