Investing in a new cryptocurrency projects always comes with a risks and nothing is certain that the investor's money will always be safe as trading and investing in cryptocurrencies is highly volatile. Especially with low market cap project/token, the token's price can be easily manipulated by big money resulting in a pump and dump scenario.
If the token has high ratings from checkers and with good ratings in audits, not only it is safe but it will also be considered as a potential token especially if it comes with great utility and fundamentals. Like it was mentioned, investing always comes with a risk but with proper analysis you can minimized the risks by knowing an important key features to consider for buying or investing in a token.
Token's Holders And Supply Distribution.
All crypto projects has or used to have "Whale" investors - these are people who got into the project early on and accumulated large amount of the token supply. Whale investors are now considered important in a project as it brings more volume in the token and can attract more attentions from the outside crowd.
Whales aren't that bad as most people think it is except if that whales is holding more than 5% of the supply. A token can be considered as safe when no wallets or a few wallets doesn't have 20-30% supply of the token. Wallets having this amount of supply can make huge impact in price when it sells.
Communicative And Transparent Team.
Building trust in the community through communication, interaction and being transparent to its investors could be one of the best asset the project could have. When the team gives time to answer and entertain its community, this brings healthy aura and positive vibes and a potential that the team is really taking the project seriously.
The team should explain any confusions in the community especially with it comes to the tokenomics of the project, how much LP and how long is it locked and what are the future utilities of the token.
Locked Liquidity And LP Amount.
A considerable amount of LP in a token can be at least 10-15% of the token's market cap while the best of it could have is having 20-30% of the token's market cap. The 90% part of the LP that was locked is considered as a green flag for the project especially if it was locked for a very long time. A token with lesser liquidity brings more volatility in price making it easier to pump and dump while token with a huge liquidity can make the price of the token less volatile and stable.
When it comes to the locked liquidity, the liquidity of the token should be locked for at least a year to be considered as safe for investors. Locking the liquidity for just a day, week or months can bring fears and making the project less attractive. This can lead to advance massive sell-off and dump in price as there will be a risk of pulling out the liquidity or being rugpulled if the liquidity isn't locked anymore.
Always Check With Token Checker (Bonus).
Most people doesn't know how to read smart contracts and can be lazy to read the whitepaper of the project to read how the token is going to work out. Therefore, the best and easiest thing to do is use a third-party application to read and check what's in the token. There are lots of token checkers out there but probably one of the best is by using Tokensniffer.
Tokensniffer made everything easy for gem hunters as it reads the most important thing in the token such as;
Token holders.
Token's liquidity, locked and unlocked date and where was it locked.
Realized the risk of a honeypot.
Token supply, max supply or the token's ownership.
Article: How To Use Tokensniffer.
Lead Image Source: Cointelegraph.
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I'm still doing my research because I'm still afraid to invest... Huhu