Mastering Qualitative Analysis: A Simple Framework for Success in Web3

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Mastering Qualitative Analysis: A Simple Framework for Success in Web3

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The best way to capture as much upside as possible in the coming flood of capital is by understanding how to get involved with quality projects.

In order to do that, you have to DYOR (very romantic, I know).

Doing your own research;

The painstaking art of having to comb through different websites, run numbers, conduct background checks, and hop from platform to platform.

Swaths of dry data points, similar products, and technical lingo can get dizzying (let alone boring).

Guess what;

Due diligence is not sexy.

You know what is sexy, though?

Making decisions with confidence and then reaping massive f*cking gains for being a smart, consistent, asset-allocating gangster.

So let’s get to it.

Content Overview

• Qualitative Evaluations

  • Rule 1 in Crypto Assesments
  • Rule 2 in Crypto Assesments
  • Rule 3 in Crypto Assessments

• What to Look for and Where to Find It

  • Website
  • Ranking Sites
  • Explorers
  • Social Media/Community
  • Content

• Final Thoughts

Qualitative Evaluations

What is a qualitative evaluation?

Simply put a mixture of a project's fundamentals and technicals.

Qualitative evaluation in crypto is like ghost hunting.

You can see it but just can’t seem to touch it.

Scams, buzzwords, and endorsements by “reputable” people end up being total flops.

Good technology with a good team working on a good concept, but for some strange reason still goes belly up.

As proven by the failures of good ideas and the stunning successes of idiotic memes, determining the very essence of what is “quality” actually means in regards to crypto requires a shift in our mental models.

Rule #1 in Crypto Quality Assessments

“ Learn, and then Think for yourself”

Don’t just be a lazy sheep.

The vast majority of us are not here “for the technology”.

The simple truth is that we want to be a part of the future and make good money in the process.

The best place to start is by being brutally honest with yourself, stop trying to virtue signal, and just define your own personal objectives. Once you have that moral alignment, you will have a higher degree of mental clarity.

Don’t let that clarity be hijacked and hogwashed by the anons on Twitter.

Given that crypto is basically built on a foundation of peer-to-peer technologies and exists outside of direct regulatory oversight, so much trashy marketing is taking place on social media that it is repulsive.

It’s okay to find a few accounts that are providing you value and have some degree of validity behind them; but even then, don’t let random people online tell you what to buy. If they are selling it, why the hell would you buy it from them… (this only really applies to new projects, although some bigger well-funded projects will engage full-fledged botnets in psyops to pump up their assets right before the market takes a sh*t, so just always be aware).

I digress.

Rule # 2 in Crypto Quality Assessments

Data is not created Equal.

Data in crypto is absolutely manipulated.

While we love the pseudonymity, privacy, and distance from regulators; it does come with its own costs.

Data in crypto is 95% (if not more) absolutely fake.

Volume on exchanges is *mostly fake (centralized and decentralized).

TVL on Uniswap is a decent measure of real value in a protocol.

TVL in some fork of a fork, on an obscure chain, full of assets that nobody has ever heard of, meh not so much.

Cumulative charts, such as “on-chain addresses” is literally worthless; by the nature of the data, those charts can only go up; so for the love of god, ignore them.

Applying models of evaluations from legacy finance might have a sprinkle of validity to it; applying modified versions of them (such as the NVT ratio which remotely resembles P/E) makes sense… until it doesn’t.

Whenever dealing with cold hard numbers in crypto, you need to accept the fact that even after the last decade of intellectual infrastructure being built around it; you must still learn where to source them and how to apply them.

Rule # 3 in Crypto Quality Assessments:

“Only fools Rush In”

“Nothing is more expensive than a missed opportunity”

This one requires mental balance unlike any other.

You cannot simply be reactive to your initial reviews and assume that they are correct.

and at the same time…

You cannot waste time delaying decisions; otherwise, opportunity shall slip away right from underneath your feet.

Balancing the urgency to act with the emotional acuity not to react requires that you tap into a higher frequency of thought; combine the counterintuitive truths of both to drive your actions.

Imagine you conducted your research and arrived at the conclusion that this one is a must-buy (for whatever reason).

Take a day,

let all of the information marinate in your mind.

Do some reconnaissance; see what others are thinking about this (those not already involved with the project).

Test out your theory on another similar asset (if there is anything that you can compare it to).

Perhaps the trickiest part of it all;

once you have slept on it

and had some revelations in the shower.

Commit to it.

Do not pussy foot.

Either configure a plan for how you will get involved or totally disregard it; you have a finite amount of mental/emotional capacity; declutter as much as possible.

The meaning of the word “decision” stems from ancient language and translates to “making a final judgment”. Understand that when you choose something, you simultaneously deny everything else.

Kinda philosophical for a crypto analysis.

Sweet.

Now then,

Onwards from the ethereal (no pun intended) and into the more tangible.

What to look for and Where to Find it

Generally speaking, there are 6 information rich areas that must be addressed in a quality assessment;

• The Brand (not just the colors, but its mission)
• The Maths (economic sustainability)
• The Data (basic data)
• The Presence (social media)
• The Content (information and its availability)
• The Design (visual is important, but conceptual even more)

So then, where do we extrapolate this information from?

There is no 100% perfect framework that works for every project. Some projects are focused on technology and don't need to spend *as much* time on social media presence as others, whereas too much social presence shows a likely overreaching dependence on marketing rather than fundamentals.

Each project should have its own unique relationship to the marketplace.

Some factors (such as branding) are based on personal preference. While you may assume that a brand is just hideous, the market might disagree with you or simply just not care.

Regardless, let's run through the QA touchpoints:

1. Website

How you do anything, is how you do everything.

Every single project that is dedicated to quality must have a website.

Yes, some of these new meta-projects don't have websites; they solely exist in communities on social media platforms. Maybe they have made money for some people; but as time passes, you will notice that everybody eventually needs one.

Whenever on the site, some of the most important things to keep an eye out for will vary based on case-by-case bases.

Don’t get too obsessive here about everything being perfect, but there are some non-negotiables:

1) Spelling. We're not talking about a ridging grammatic structure that adheres to never missing a comma… We’re talking about just low-effort errors. One error is a red flag but is forgivable. Anything more than 2 is downright disregard on behalf of the team in terms of their attention to detail. Odds are that if the website has too many misspellings (something rather trivial), then there will be other logical errors in other areas of the project. Don’t just let it slide because teams are “not native”; in this day and age, being from another country has nothing to do with delivering quality language.

2) Cohesiveness. The concept of the project must be made as clear as possible, as soon as possible. Things must be organized, links must be pointing to the correct destinations, and there must be a sense of coherent flow and consistency.

3) Team. granted, many quality projects (such as Bitcoin and Binance) might not have this directly on their website. However, any early-stage project MUST.

This is a very controversial point because everybody loves the story about anonymous founders changing people's lives with incredible wealth… however, if that is your preference, you are not investing; you are gambling. This is usually the first threshold of hard red flags.

- If you see teams with no links to social media (red flag 🚩 )

- If the teams are using some discombobulated filter that makes it hard to see their faces (🚩red flag)

- If you see teams that are working on other projects simultaneously (🚩 red flag)

2. Ranking Sites

Directories such as CoinMarketCap, CoinGecko, CryptoRank, and a slew of others, are a fundamental requirement for any project. If even low-quality scams can go out of their way to get listed on these sites, there is absolutely no reason that a quality project is not.

Check out how many different resources actually list it and inspect the market information about the project.

This one is a matter of asking the right questions:

- How long has it been trading?

- What trading pairs does it have?

- What is the price action looking like?

- What exchanges is it listed on?

- How many exchanges is it listed on?

- How many followers are there? (if there is this option)

- What is the Market Capitalization?

- What is the circulating supply?

3. Explorers

Assuming the project already has a token in circulation, you must hop on over to the chain explorer and run a manual inspection.

This involves a little bit of detective work. Try to retain naturality with a light dose of skepticism; don't start confabulating stories in your own mind about what things mean; just stay objective and collect information to build a mental model of what's actually happening.

Take a look at who/what address deployed the contract. This should generally be a very clean account with minimal (or none) other actions besides the deployment of the contract. If you come across an account with a prolonged history prior to deploying the token contract, review it. See what other assets it's holding, what the nature of the transactions was, and how the frequency relates to the contract deployment.

On the contract’s page itself, take a look at the holder distribution, and actually follow through to see what those accounts are (especially any holding more than >1% of the token’s supply).

Look to see that the contract has had some form of verification take place.

Funnel through the transaction history and get a sense of what the token holders are doing on-chain.

See what the holder count looks like.

4. Social Media / Community

This has become a necessity for all projects, businesses, and individuals. Having a social media presence is non-negotiable.

The first thing to assess is the platforms being used; crypto projects thrive on three major platforms Twitter, Reddit, and Youtube; everything else is secondary. It's awesome, but not necessary to use them all; the base requirement is at least one of the three platforms.

Start looking for answers to these questions:

- review the last 10/20 posts,

→ what is the engagement quantity on posts (how many likes/comments)

→ what is the quality of that engagement on posts (what are the comments saying?)

→ who is engaging with the posts? (open the profiles of accounts that are interacting, and figure out if it is a bot or a real person {should be pretty easy})

- who follows them (other notable projects/individuals or bots)

- What kind of material is the project pushing? (educational, informational, advertising, general)

- How often do they post?

5. Content

Content is becoming the defacto method of building a project’s brand image and voice. It tells their message, optimizes their SEO, and truly reveals their communicative intentions.

When speaking about content, it’s not just social media chatter (yes, your tweets are content) but we also know that as it relates to a crypto project, your community is your best social media marketing proof. When speaking about content, were talking about a multi-faceted model provided in multiple different form factors.

If a project is dedicated to communicating with its audience, it will provide short-form and long-form content that is written and posted across multiple venues, including its websites, medium, substack, mirror, HackerNoon, and others (no less than three). Visual content such as images, gifs, and videos should also be well distributed, starting with on the website and including their social media(s). Of course, we have the auditory; included with video content, auditory also includes AMAs and podcasts (uncommon).

Another form of fundamental content is, of course, the core project documentation. This means whitepapers, litepapers, dev docs, pitch decks any other formal content.

Taking this a step further, you can leverage some of the more advanced data points built on Crypto-native models including:

- NVT Ratio (Network Value to Transactions)

- NVM Ratio (Network Value to Metcalfs Law)

- MVRV Ratio (Market Value to Realized Value)

- Money flows (what assets are being traded against it and how frequently)

Final Thoughts

Doing your due diligence will set you apart from the vast majority of participants that blindly follow. It will help develop a basic framework for how you structure your thinking by asking the right questions and understanding what to look for.

Refine your thinking.

Make some incredible financial decisions.

Get rich AF.

Get off the grid and away from the system.

Give your kids a beautiful life.

Thank you for reading;

I hope this serves you well on your journey.

Live long and prosper. 🥂