Fundamental Analysis Checklist for Crypto – How to Review a Project!

Fundamental Analysis Checklist for Crypto – How to Review a Project!

Fundamental analysis and crypto? That doesn’t sound right together!

Here in ApeInto, we use this criterion that we built ourselves to grade the projects that we are interested in. When doing fundamental analysis, you want to be as objective as possible, that’s why the scoring system has very specific requirements for it to be graded. Subjectivity cannot be avoided, but we should try to minimize it.

We hope that this criterion can help you in doing your own research, and we hope to get feedback on how we can improve our scoring system.

The scoring system is divided into three parts: Team, Safety, Potentiality, Popularity & Entry.

  • With the overall score, we’ll be able to gauge our conviction level with the project.
    • Conviction is defined as, our belief that the project will do well in the LONG RUN.
  • We cross-reference the conviction level with its market cap to determine the risk level.
    • The risk level is defined as, our calculated assumption of a black swan event that derails it from our conviction level.
  • With the risk level, we again cross-reference it with the entry score.
    • The entry score will then determine if at the particular time of the review, would it be a good idea to APE IN!

Conviction Grading based on Total Score


Main Categories of Evaluation

  • Team
  • Safety & Security
  • Potentiality
  • Popularity
  • Entry

Team

Website

This criterion is all about effort, consistency, and clarity. At a minimum, a project’s website should be beautiful and informative. At first glance, it must entice and clearly show what the project is about.

*Subjective

Scoring:

  1. Low effort design.
  2. The website is a copy of another project’s page with some modifications. It may also contain falsified data or fraudulent claims.
  3. The website is average in terms of UI and UX.
  4. The website is sufficient but lacks information or clarity.
  5. The website is at par with modern standards of web design.

Modifiers:

  • (Instant 0) There is no website.
  • (- 1) Domain was registered 3 months prior to the review.
  • (- 1) Lots of grammatical errors.

Documentation & Roadmap

A serious project would spend time properly documenting its project with all its intricacies. It should be explained at a level that most investors must be able to comprehend. A project only looking to make quick profits would overlook this project aspect.

Scoring:

  1. Low-quality with vague explanations or if it seems to be rushed.
  2. A complete copy of another project’s documentation.
  3. The documentation does not cover all the functionalities the project may have.
  4. It is sufficient.
  5. Top-notch documentation with the rationale behind the decisions; Science and math to back principles; While being able to deliver that information in an understandable way.

Modifier:

  • (Instant 0) No documentation is available.
  • (-1) Completely unrealistic timeline or roadmap is not available.
  • (-1) Roadmap does not extend beyond a year from now.
  • (-1) There are delays in the implementation of the roadmap.
  • (+1) Subjective belief in the project’s vision.

Team

While there are multiple projects that are successful and trusted by the community even if the team is anonymous, there’s no question that knowing who we deal with brings a lot more confidence in a project, especially one that is just starting.

Scoring:

  1. KYC’ed by small KYC firms or social media influencers.
  2. KYC’ed by auditing firms, reputable KYC firms, and launch pads, but still largely a publicly anonymous team.
  3. Doxxed team. They, however, are lacking in numbers to properly manage the project that they are trying to accomplish, lack the proper credentials, lack the proper connection to be successful, or a combination of these variables.
  4. Doxxed team. The team has the proper credentials, connections, and personnel to be an effective development team.
  5. Doxxed team with a prominent figure spearheading.

Modifiers:

  • (Instant 0) No available data on the team or is unable to publicly verify the information presented.
  • (- 1) Not all team members are KYCed or Doxxed
  • (- 1) Known record of failed projects previously.
  • (+ 1) Track record of successfully executing previously, may it be an IRL company, or a crypto project.

Partners & Investors

Scoring:

  1. Less than 3 partners or investors.
  2. Less than 6 partners or investors.
  3. Less than 10 partners or investors.
  4. Less than 20 partners or investors.
  5. More than 20 partners or investors.

Modifiers:

  • (Instant 0) No partners or investors.
  • (-2) Majority are bad venture capitalists. Orange to red on our VC list.
  • (+1) Actively forms connections with other projects post-launch.
  • (+1) A third of the total investors are good venture capital. Blue to green on our VC list.

Safety & Security

Contract Audit

A smart contract audit is an extensive methodical examination and analysis of a smart contract’s code. This process is conducted to discover errors, issues, and security vulnerabilities that the code may have. More sets of eyes looking at the code means fewer chances of finding exploits that hackers could use to gain an advantage over the investors. These smart contract audits also cost a lot of money and if the developers are willing to pay significant amounts of cash to do, it would mean that they are serious about the project.

Scoring:

  • 1: No smart contract audit.
  • 2: Smart contract audit is planned.
  • 3: Smart contract is audited by a relatively unknown or small company.
  • 5: Smart contract is audited by a reputable company.

Modifier:

  • (Instant 0) Unverified smart contract
  • (+ 1) Financial audits of the project’s gross and net profit.
  • (+ 1) Public GitHub with lots of commits from other users.

Function Checks

Some contract functions are beneficial for the project but may be used by the developers to conduct rug pulls or do shady transactions which may benefit them.

These functions include the following:

  • Ability to mint new tokens or NFTs
  • Modify tax
  • Modify max transaction
  • Modify max sell order
  • Include a specific address to be included in the reward pool
  • Disable trading for everyone or a specific address
  • Ownership of the contract
  • and more…

Scoring:

  1. The majority of the functions are still enabled. However, currently, it is not a honey pot.
  2. 4 to 5 of the functions are still enabled.
  3. 1 to 3 of the functions are still enabled.
  4. No potentially malicious functions were detected aside from the mint function.
  5. Ownership is renounced

Modifiers:

  • (Instant 0) Unverified smart contract

Liquidity Lock & Transactions [Not for Presale]

Most of the projects we are auditing are under a smart chain and thus the liquidity is handled by an automated market maker. The higher the score is, the less likely it is that the developer or anyone is able to remove that liquidity from the pool. A simple transaction checks to see if the developers are sending coins or tokens to addresses to which they should not be sent.

Scoring:

  1. Less than 20% of the liquidity is locked.
  2. More than 20% of the liquidity is locked.
  3. More than 40% of the liquidity is locked.
  4. More than 60% of the liquidity is locked.
  5. More than 80% of the liquidity is locked.

Modifiers:

  • (Instant 0) Liquidity is unlocked.
  • (-2) Suspicious transactions noted.
  • (+1) Liquidity is locked for a long period of time (a year or more.)
  • (+ 1) Proper multi-sig wallet is employed.

Wallet Analysis [Not for Presale]

Unlocked wallets above the liquidity pool are a major security risk. Even if the project has passed all the functions check, these unlocked wallets can still dump on the investors. Aside from that, synchronous market selling by the whales may impact the price significantly if they hold a large bag compared to the liquidity.

Scoring:

  1. No unlocked wallet is above the liquidity. The top 10 wallets cumulatively exceed 300% of the total liquidity.
  2. The top 10 wallets cumulatively exceed 200% of the total liquidity.
  3. The top 10 wallets cumulatively exceed 150% of the total liquidity.
  4. The top 10 wallets cumulatively exceed 100% of the total liquidity.
  5. The top 10 wallets cumulatively are less than 50% of the total liquidity.

Modifiers:

  • (Instant 0) Unlocked wallets not owned by the developers are above the liquidity pool and thus are vulnerable to synchronize market selling.

Volatility [Not for Presale]

Volatility is the measure of how drastically a market’s prices change. A market’s liquidity has a big impact on how volatile the market’s prices are. Lower liquidity usually results in a more volatile market and causes prices to change drastically; higher liquidity usually creates a less volatile market in which prices don’t fluctuate as drastically which may hinder its moon potential.

Volatility in % = (Unlocked Market Cap/Liquidity) * 100

Scoring:

  1. Less than 1%; More than 20%
  2. Less than 2%; More than 17.5%
  3. Less than 3%; More than 15%
  4. Less than 4%; More than 12.5%
  5. In between 5% to 10%

Modifiers:

  • (-1) Smart contract employs a mechanism that drains the liquidity for one purpose or another.
  • (+1) Active “grid trading” bot-like mechanics are in place by the developers to stabilize the price.
  • (+2) Oracle is added.

Moon Potential

Value

A project that does not try to solve any problem does not bring any value; thus it just becomes a means of wealth distribution from those who entered late to those who entered earlier. If a project creates value, in some way or another then the investors or users are incentivized to hold the token past their investment horizon; actually use the token for its use case; Or pay for the services offered by a project.

Scoring:

  1. Very niche value solving use case.
  2. It is a tool to solve major problems. People would pay for the service or product of the project for prospects of greater reward in the future.
  3. People would pay for the service or product of the project if given an equal compensation or reward that they value.
  4. People would pay for the service or product of the project even if at a small monetary loss.
  5. People would pay for the services or product of the project even if without monetary compensation or reward.

Modifiers:

  • (Instant 0) No use case.
  • (-1) The project has no way of generating profit aside from taxes and new investments.
  • (+1) The project has the means of generating profit but not enough to cover inflation.
  • (+2) The project has means of generating a profit and is currently undervalued relatively.

Quality & Technology

While having value creation is important, so is the overall quality of the project and its innovativeness.

Scoring:

  1. Poor quality, low effort project.
  2. Bad quality project. No innovation or a complete copy of another project.
  3. Average quality. Tries to innovate on an existing solution.
  4. Good quality project. It is a new protocol.
  5. Excellent quality makes it an industry standard.

Modifiers:

  • (+1) Targets population outside of crypto.

Competition

Some markets/niches are more competitive than others and thus market penetration is really difficult.

Scoring:

  1. 10 or above direct competitors.
  2. Less than 10 direct competitors.
  3. Around 4-6 direct competitors.
  4. Less than 3 direct competitors.
  5. No competition.

Modifiers:

  • (+ 2) First of its kind before it got forked by other projects
  • (+ 1) First mover advantage on a blockchain
  • (+ 1) Backed or endorsed by the blockchain it is on.
  • (+ 1) Competitive moat such as connections, patency, or capital requirement. It might currently be the most innovative so far of its kind even if it’s with a lot of competitors.

Tokenomics

Special allocation is defined as wallets that are intended for the team, advisors, partners/venture capitalists, and private sales. These are individuals who got the tokens for really cheap or did not input money into the ecosystem.

Scoring:

  1. Special allocation of more than 40%. No vesting schedule if there’s special allocation.
  2. Special allocation of more than 30%.
  3. Special allocation of more than 20%.
  4. Special allocation of more than 10%.
  5. Less than 10% special allocation.

Modifier:

  • (-2) Private sale is more than 3x cheaper than the listing price.
  • (-1) Private sale is more than 2x cheaper than the listing price.
  • (-1) Vesting is too fast, or too large at a time.
  • (0) Standard vesting schedule of 20% at TGE, then cliff of 2 months, vested linearly for the next 12 months.
  • (+1) Vesting schedule is spaced out at 1-year cliff then linear vesting over the next 12 months.
  • (+1) The team has no allocation and would depend on the transaction fees for revenue.

Supply

Scoring:

  1. Less than 20% of the supply is circulating.
  2. Less than 40% of the supply is circulating.
  3. Less than 60% of the supply is circulating.
  4. Less than 80% of the supply is circulating.
  5. More than 80% of the supply is circulating.

Modifiers:

  • (-1) Supply is inflationary.
  • (+1) Supply is deflationary.

Token Utility

This category explains all the utilities, features, and mechanics in place to keep the token out of circulation, increasing the demand and price in the process.

Scoring:

  1. The coin or token has no token sustainability mechanisms. It has no barriers to massive sell-offs nor are there any incentives to holding the token. In our macroeconomics income table: Expenses>Delayers>Profit
  2. The coin or token has few utilities or limited ways of keeping inflation at bay. In our macroeconomics income table: Profit=Delayers=Expenses
  3. The coin or token has utilities in place to keep the supply in the market at equilibrium if no massive sell-off happens. In our macroeconomics income table: Profit>Delayers=Expenses
  4. Incentivizes holding of the token while punishing selling. Deflationary mechanisms are in place to keep the chart looking healthy. In our macroeconomics income table: Profit=Delayers>Expenses
  5. The coin has multiple utilities and has proven itself that it is enough to keep the supply low in the market. It has excellent economic principles which can withstand various conditions. In our macroeconomics income table: Profit>Delayers>Expenses

Modifiers:

  • (-1) Token Utility = (Trading Volume/Market Cap)*100 is less than 2.5%
  • (+1) Token Utility = (Trading Volume/Market Cap)*100 is more than 10%

Moon Potential

Some projects have massive potential, while some don’t. This category compares the project’s current price and market cap to similar existing projects to gauge its earning potential.

Scoring:

  • 1: Less than or equal to 3x
  • 2: Less than 10x
  • 3: Less than 25x
  • 4: Less than 50x
  • 5: More than 50x

Modifiers:

  • (-2) Too much PreSale Contribution (Raised Contribution/Total # of Community Members) is > $100/member.
  • (-1) Too much PreSale Contribution (Raised Contribution/Total # of Community Members) is >$50/member.
  • (-1) Valuation = TVL/Market Cap is less than 50%
  • (+1) Valuation = TVL/Market Cap is more than 100%

Community & Hype Criteria

Working Product

We don’t pay for a promise or a non-functioning product. This criterion takes into account the fact that a polished final product will always sell better than that of a demo.

Scoring:

  1. In the conceptualization phase. Only has a token.
  2. With a trailer or demo.
  3. Is in the beta phase and only accessible to a select few or has a working product but with missing key features.
  4. Has a working product with most of the planned features out. Some bugs are noticeable.
  5. Final product.

Community Following

A project’s success in my opinion is half the responsibility of its community. A strong community HODLs through the hard times and celebrates together through the good times. Having an active community also attracts new investors easier.

Scoring:

  1. The project has less than 1,000 community members.
  2. The project has less than 10,000 community members.
  3. The project has less than 50,000 community members.
  4. The project has less than 100,000 community members.
  5. The project has more than 100,000 community members.

Modifiers:

  • (Instant 0) The telegram or discord group was recently made.
  • (-2) Suspicions of a fraudulent count. If (holders/community members)*100 percentage is less than 10%.
  • (-1) Lots of superficial FUD
  • (+1) Active community manager.
  • (+2) Meme culture is developing.

Social Media Presence

A project needs a lot of hype to succeed, sometimes that’s all that a project needs to succeed. 

Scoring:

  1. The project has less than 1,000 followers across all platforms.
  2. The project has less than 10,000 followers across all platforms.
  3. The project has less than 50,000 followers across all platforms.
  4. The project has less than 100,000 followers across all platforms.
  5. The project has more than 100,000 followers across all platforms.

Modifiers:

  • (Instant 0) They don’t have a social media account.
  • (-2) High amount of low-quality accounts according to Bot-o-Meter (3.75-5).
  • (-1) Medium amount of low-quality accounts according to Bot-o-Meter (2.5-3.75).
  • (-1) Less than 1% engagement rate according to GetMashhor.com (disregard their own engagement rating).

Influencer Coverage

Scoring:

  1. Micro-sized influencer coverage (Less than 10,000 followers)
  2. Small-sized influencer coverage (More than 10,000 followers).
  3. Medium-sized influencer coverage (More than 50,000 followers)
  4. Big-sized influencer coverage (More than 150,000 followers)
  5. Mainstream Coverage (News Outlets)

Modifiers:

  • (Instant 0) No influencer coverage
  • (-1) No recent influencer coverage (more than 3 months)

Number of Holders [Not for Presale]

Self-explanatory.

Scoring:

  1. Less than 1,000 holders.
  2. Less than 10,000 holders.
  3. Less than 50,000 holders.
  4. Less than 100,000 holders.
  5. More than 100,000 holders.

Modifier:

  • (+1) CeX Listing
  • (+2) Top 5 CeX Listing

Narrative/X-Factor

Very subjective criteria. Some projects just have the “it” factor while others are just plain boring. This criterion adjusts the score depending on the reviewer’s perception of a project.

Scoring:

  1. Boring.
  2. Somewhere in between.
  3. Has Potential
  4. Somewhere in between.
  5. This is it.

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