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Delving into DYOR: Understanding its Crucial Role in Smart Investing

Delving into DYOR: Understanding its Crucial Role in Smart Investing3 min read
  • February 20, 2024
  • by UH News

In the markets, misinformation can spread very quickly and easily, and even if the news is fake, the consequences are very real. DYOR or"do your own research" is one of the most used acronyms in cryptocurrencies to gather enough data to make informed decisions and avoid the pitfalls of'fake news'.

In October 2023, a fake news story triggered a brief 10% rally in Bitcoin, erroneously claiming that BlackRock Inc. had been given the green light to launch a spot exchange-traded fund (ETF) of the cryptocurrency. Over the next 24 hours, more than $85 million worth of positions were liquidated, mostly by traders betting on lower prices.

Later, in the first week of January 2024, liquidations of $500 million were recorded due to another false announcement of impending Bitcoin ETF approval, triggering the worst losses in months. These experiences reflect how susceptible investors can be to misinformation and how social media can increase crypto market volatility.

DYOR like the Pros

DYOR involves researching each asset before placing money and taking the time to understand the basics of blockchain technology, consensus mechanisms, and smart contracts to build a solid foundation for evaluating projects.Once you understand the basics, move forward by seeking information in more specific areas. But what exactly should the investor be looking for and where in the troubled world of online information can reliable data be obtained?

Read the White Paper

The white paper is the document where the essential information about cryptocurrency is concentrated. It includes the objectives, the products, the characteristics, the parameters that give the asset its economic value, and information about the participants in the project.

Know the market capitalization and offer of the project you are interested in, as well as its technical development and partnerships.

Who is Behind the Project?

Anonymity has been a feature of many cryptocurrencies since their inception. The identity of Satoshi Nakamoto, Bitcoin's creator, is still disputed, and new cryptoassets of dubious origin emerge every day. There are more than 26.000 cryptocurrencies, but most are inactive and the top 20 accounts for almost 90% of the total market.

Investors should know who the project developers are before investing. This is not a matter of preference but of security. Increasing regulations demand legal responsibility and accountability, which has led new-generation cryptocurrencies to seek to adhere to the available legal framework.

For example, Unicoin is a real asset-backed cryptocurrency, which is the official currency of the Unicorn Hunters show, featuring personalities like Apple co-founder Steve Wozniak. The show connects entrepreneurs seeking funding with millions of potential investors from around the world and offers viewers the opportunity to invest in multi-billion dollar ideas in the pre-IPO phase.

Unicoin reports publicly and the identities of both its creators and board of directors are publicly accessible. So before choosing a cryptocurrency, it is vital to know if its creators have the professional profile and skills to execute the project.

What is Backing the Cryptocurrency?

As the value of many cryptocurrencies depends on supply and demand and these factors are manipulable through news and social networks, this market is known for its volatility.

One of the viable options has been the creation of cryptocurrencies with other models. Stablecoins, for example, are tied to the value of fiat money, listed commodities, or another cryptocurrency.

While the new generation of cryptocurrencies rescues the concept of backing in real assets. If we return to the example of Unicoin, the backing comes from $1.4 billion in real estate acquired in part through its 140 program, which directly exchanges properties for unicoins paying 140% of their appraised value, and the shares of companies selected in the Unicorn Hunters show.

The backing is important because it reduces volatility and provides stability to the cryptocurrency.

Verify Before Investing

The threat of misinformation can significantly impact markets and underscores the need for investors to be diligent in verifying information before making financial decisions. In an environment where information can be as powerful as it is volatile, DYOR emerges as an essential tool for investors looking to build a solid foundation and avoid being easy prey to speculation and fake news.