Finding ultra-low-cap coins can be exciting but risky. Most of these coins, often called “shitcoins,” are scams. In this guide, we’ll cover basic techniques to help you research and spot undervalued coins. Before we dive in, here are some important rules to know before getting started.

General rules when investing in crypto

  • Only invest what you can afford to lose
  • Invest at your own risk
  • ALWAYS stick to your own rules and research. If a coin checks all boxes except one, don't buy it
  • Diversify: Don't put all your money in just one token
  • If you don't understand it, don't buy it
  • Take profit on your winners. It's way harder for a coin to go from a $1M market cap to a $10M market cap, than it is to go from a $1M market cap to a $10K market cap
  • Stay disciplined: stick to your principles
  • Hype always fades off

As many of you know, the top source for finding new tokens is the “New Pairs” section on Dexscreener: https://dexscreener.com/new-pairs. Head over to Dexscreener and check out any coin with a market cap under $100K.

New token checklist

You might be wondering: how do I know if a coin is legit or not? A good way to start is by using the checklist below. Keep in mind that this is just a starting point, and you shouldn’t buy a coin that doesn’t meet all the criteria. If this feels like too much work or you’re unsure how to go about it, don’t worry. At CoinGems, we publish daily articles with in-depth research, doing the hard work for you. We even dive into Telegram groups, connect with the community, reach out to developers, and ask the tough questions. This checklist is for those with technical on-chain knowledge who don’t mind doing some investigative work.

1. Contract Verification:

• Is the smart contract verified on a trusted platform (e.g., Etherscan, BSCScan)?

• Review the code for any hidden or suspicious functions, such as minting, blacklisting, or tax adjustment functions.

2. Deployer Wallet Origin:

• Was the deployer wallet funded through a reputable source (e.g., Centralized Exchange [CEX]) or another well-established, non-suspicious wallet?

• Investigate the deployer’s wallet history for any prior suspicious transactions or red flags.

3. Liquidity Status:

• Is the liquidity locked? If so, for how long?

• Verify if the liquidity lock details are transparent and accessible to the public.

4. Contract Renouncement:

• Is the contract renounced, meaning the owner has relinquished control, preventing further changes to the contract?

5. Trading Activity:

• If trading is live, analyze the volume. Are there many buys and sells, particularly if the pair is more than 20 minutes old?

• Look for 50-100 transactions with at least 15 sales to indicate healthy trading activity.

6. Holder Distribution:

• Is the token holder distribution healthy? Check for any disproportionately large holdings that could suggest potential pump-and-dump risks.

7. Legitimacy of Links:

• Are all provided links (e.g., website, social media) legitimate and not stolen? Ensure that the domain and social accounts are not recently created or suspicious.

8. Team Transparency:

• Is the team behind the project transparent? Verify the identities of the developers and their previous experience in the blockchain space.

9. Audit Reports:

• Has the smart contract undergone a third-party audit by a reputable firm? Review the audit report for any unresolved issues or concerns.

10. Community Engagement:

• Is there active and genuine community engagement? Look for vibrant discussions in social channels like Telegram, Discord, or Twitter, and avoid projects with only artificial hype.

Other stuff to check

When a token’s liquidity is locked, make sure the lock is for at least 30 days. Also, check the details on Dexscreener to ensure everything looks normal. Visit the project’s website, then head over to X (formerly Twitter) and scroll through their past tweets. On X, you can also search for the token’s tag (e.g., $BEER) to see what others are saying about it. Keep in mind, if the token was launched on Pinksale, there’s a very high chance it’s a scam.

Final steps

Even if the token meets all these criteria, we still advise you not to invest right away. First, engage with the community and do some investigating. Is the community active? Do the developers follow through on their promises? Can you communicate directly with the developers? Can they explain any suspicious transactions? Also, observe how they respond to light FUD (Fear, Uncertainty, Doubt). A strong community won’t just ban people who raise concerns; they’ll provide explanations.

Too much work?

If this all seems like too much work, consider becoming a premium CoinGems member. As a premium member, you’ll gain access to our “Alpha Research” and “Ultra Low Cap” categories, where we do the research for you and provide all the information you need. With these exclusive articles, you’ll have a solid understanding of which tokens are worth considering and which ones are likely scams. Our goal is to help you make informed decisions and achieve gains with the right coins.

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