Learning Hub
A brief summary of investing tips and potential red flags to look out for on a presale.
Below are 3 sections to help investors make more educated decisions when investing into pre and post launch tokens. There are: Investor Tips, Red Flags to Look out for in a Presale, and Helpful Articles. There may be some overlap between these sections but all helpful information neverthless.
- 1.Due Diliegence
- 2.Screen the Smart Contract
- 3.Understand a Project's Tokenomics
- 4.Project Team and History
- 5.Is a reputable Launchpad being used for presale?
- 6.Only invest with funds you're comfortable losing
- 7.Make a check list and stick to it!
- 1.Due Diliegence
It's important that when investing into a crypto presale or live token, that you research it extensively. Some of the tips and red flags to look out for below will help you formulate your own due diliegence process.
- 2.Screen the Smart Contract
There are a number of tools you can use to check if a contract address is safe. Ideally, the smart contract has already been audited by a reputable company (check out our Audit section to see CookieSale approved auditors). Be on the look out for honeypots and contracts with exploits. You can use some of the free tools linked below to check a contract yourself prior to investing.
Note that these tools are meant to assist you. A smart contract without an audit is at a much higher risk of exploits even if everything checks out with the tools above.
- 3.Understand a Project's Tokenomics
Know the tokenomics of a project. This includes the buy and sell tax when a token is live, as well as the amount of locked and unlocked tokens. Sometimes projects will tax farm by setting abnormally high taxes on sells (which can be an unpleasant surprise if you're not aware beforehand).
While a project may have locked LP, if a large amount of the token supply is unlocked, this can put investors at risk of being dumped on by the project owner.
- 4.Project Team and History
Make sure you identify who the team is behind the project and try to research whether they've done previous projects. Anonymity of the team greatly increases the risk of a project. A KYC is a safeguard you want to see, as it acts as a deterent for project owners from doing something nefarious. However, it's important to understand that not all KYC and KYC companys are the same.
- 5.Is a reputable Launchpad being used for presale?
If a project is in presale phase, make sure they are using a reputable Launchpad like CookieSale. Projects that do dApps on their website can be cause for alarm as there is nothing stopping them from taking all the funds after the sale.
- 6.Only invest with funds that you're comfortable losing
This is investing 101. Never invest more than what you're comfortable losing! Crypto is for the most part decentralized and highly volatile. The lack of regulation in the space heavily increases the risk compared to traditional fiat investments.
- 7.Make a check list and stick to it!
Make a check list of what you want to see in a project and stick to it! It can be very tempting to just take a blind risk at times when the FOMO hits hard. While it might still work out for you periodically, most experienced crypto investors will tell you this is not a recipe for long-term success. Control the FOMO, be patient, and do your proper research before jumping in!
- 1.Is the Liquidity Locked and if so for how long?
- 2.How many tokens are unlocked?
- 3.Does the project have an audit or KYC done through a reputable company?
- 4.Were there previous seed raises?
- 5.Does the project have an active community in Telegram or Discord?
- 6.Is the team anonymous on their Telegram or Discord?
- 7.Does the team have a good or bad reputation in the space?
- 8.What happened in previous projects?
- 9.Is there a website and whitepaper?
- 10.Is there a clear utility?
- 1.Is the Liquidity Locked and if so for how long?
You can see right on the CookieSale platform the percent of liquidity that will be paired and the length of time it is locked for. The percentage indicates both the amount of tokens (relative to the tokens allocated for presale) and the funds raised (relative to the hardcap). Liquidity pairing locks below 51% will come with a warning badge to give investors a heads up.
The CookieSale presale raised 500 BNB in their presale with 20% of the total supply allocated towards it. The liquidity percent was set for 51%. Therefore, 51% of the tokens allocated to the presale and 51% of the funds raised will be paired for the LP.
It’s important to understand how long the liquidity is locked for. You can see the Liquidity Lockup Time right under the Liquidity Percent. If you’re investing, make sure to mark the date for when liquidity unlocks. Project owners have the power to re-lock the tokens prior to the unlock date. Proceed with caution if owners choose to wait until the tokens unlock.
- 2.How many tokens are unlocked?
While locked liquidity can provide security from an a standard “rug-pull” by draining the liquidity, many users aren’t aware that project owners who are in control of a large portion of the unlocked token supply can drain liquidity this way as well.
You can view the percentage of unlocked tokens under the Tokenomics section at the bottom of a presale page. This will display the Total Token Supply allocation. You can see how much is allocated toward the presale, liquidity pairing, burnt, locked, and unlocked.
On CookieSale, we have both liquidity and token lockers that are available free of charge. The liquidity will automatically lock once a presale is finalized, but project owners must manually lock additional tokens themselves. The lock information will be viewable for anyone right on the token locker.
- 3.Does the project have an audit or KYC done through a reputable company?
While CookieSale does not require mandatory KYC and Audit (except for Private Sales), it’s highly encouraged that both are done prior to launch. CookieSale provides badges for projects that have successfully completed these processes that users can click on to see the source. We only accept Audits and KYC verification's through our approved auditing partners.
It’s important to note that a KYC is only as good as the process in which it was conducted. There are cheap KYC firms that don’t use much more than an eyeball test of whether a photo matches up with an identification. Further more, no authentic verification is done to confirm whether the individual(s) is on the team, or more importantly, is actually in control of the contract.
A good KYC process, such as our own Third Party provider in Contract Checker, are extremely thorough. Using AI tech, they’re able to not only scan and match photos with government identification cards, but scan criminal databases both domestically and internationally for red flags. Furthermore, we require a video sent in to verify that the individual in control of the contract wallet has KYC’d.
- 4.Were there previous seed raises?
It's important to get a full picture of the projects previous raises. If a project has done a large private sale before a presale, find the information on how much was raised and the discount those investors are getting. Discounts higher than 10-15% can be cause for alarm.
- 5.Does the project have an active community in Telegram or Discord?
Assuming they have one a Telegram or Discord (a red flag if they don't), visit their communities and see what kind of engagement they are getting. Suspicious projects may fill their channels with bots to provide the illusion they have an active community. You can usually view the amount of members total in the group and the amount online. A ratio of 1 active member for every 10 total is typically a good ratio.
Telegram or Discord channels that are subscriber based that don't allow for members to actively communicate are cause for alarm.
- 6.Is the team anonymous on their Telegram or Discord?
Another red flag might be the project owners being anonymous in their Telegram group. While a Telegram profile itself provides anonymity, sometimes nefarious devs will hide their Telegram profile and communicate without revealing their profile.
- 7.Does the team have a good or bad reputation in the space?
If a project owner isn't anonymous, try to do some research by either asking them directly or asking in other groups if they have a reputation. On top of this, if they are completely unknown and doing "first project", this might also be a red flag. This isn't always the case but something to be aware of.
- 8.What happened in previous projects?
If they have had previous projects, find out what happened in those. It's important to keep in mind that just because a project failed, doesn't necessairly mean that the owners were up to no good, but it's important to find out exactly what happened. This might give you a more objective view of what kind of future their new project holds.
- 9.Is there a website and whitepaper?
At the bare minimum, a project should have a working website and a whitepaper with clear information depicting the vision and direction of the project. While the depth of information on these are important, taking into account the quality in which they are presented is as well. Does the website look like it was cropped together in a day? Is the white paper vague and/or confusing in its display?
Often, the quality of the website and whitepaper can help depict the quality of the project itself.
- 10.Is there a clear utility?
Last but not least, is there a clear utility underlining the project? One of the most important things you should be trying to understand about a project is it’s utility and overall purpose. While meme coins with no real use-case can and have been successful in the short term, it’s important to understand that they typically fade out in the medium to long-term. The utility of a project will determine it’s overall potential.
Understand the utility of a project your investing and make a decision whether this has a future and is worthy of your investment.
Last modified 30d ago