How to analyze cryptocurrency: basics, particular cases, and sources

Those who have been watching Bitcoin since 2011 know that it has been through a lot: multiple times its price jumped up 700-800% and slowly declined to settle at the next historical low. Bitcoin cost less than a dollar at its beginnings; its market cap was ridiculous. Yet it grew into a monster asset, $60,000 per coin.

Rookies and seasoned veterans alike dream about having a price‑prediction skill, to buy on the low and sell on the high. Unfortunately, there is no one-size-fits-all solution. We can help you make fewer mistakes, and we can share a couple of insights. How to analyze cryptocurrency data? How to analyze cryptocurrency market? Let’s get on to it.

How to analyze cryptocurrency without experience

Lots of people come into the domain of cryptocurrencies out of greed or out of curiosity. It is hard to ignore an asset (Commodity? Security? Currency?…) that can cost fifteen times more today than it used to a month ago.

Sure, there are quite a lot of other things that increase in price over time, e.g. real estate. It still gains price slower than crypto; and you can’t buy a tiny fraction of an apartment or house.

So what do you do to estimate the strength of a particular coin?

Whitepaper

Some developers who want to stand out call their coin’s technical documentation a “yellow paper” or “black paper”. It doesn’t matter what it’s called, there has got to be a documentation of some kind.

Is the coin in question just a bitcoin fork with minor improvements like Vertcoin? Is it built from scratch to run its own blockchain like Ripple? Is it involved in a plagiarism scandal like Tron?

Media coverage

It must be worth attention if it’s in the headlines everywhere. Of course, it is best to spot a promising coin before it becomes mainstream, but even if you weren’t the happy one who bought MINA or SOL during the pre-sale, don’t think that “it’s too late”.

Mind the other factors of a coin’s trustworthiness. Its development team might put a lot of money into the media campaign but they still have to show the community some real applicable value.

Friend’s opinion

Do you have a friendly crypto expert who could educate you a bit? It may be the person who suggested you to invest a little time and money into digital currencies. Don’t be shy, ask them for advice.

Just remember: you are the one who is responsible for your money.

How to analyze cryptocurrency based on its past performance

It is easy to distinguish a team that wants to boast their achievements from the one that has not much to boast.

As you look through various cryptocurrency websites, you notice that some projects display their roadmap right away, accompanied with exact achievement dates. Some projects, on the other hand, have no roadmap at all.

Another way to estimate the potential of a given coin is to look at its core team members. Perhaps they were spotted in other famous projects: e.g. Ethereum, Dogecoin, Ripple, etc.

Looking at the price chart is a good way to analyze crypto. We’ll get to it in a moment.

How to analyze cryptocurrency prospects

The application niche, first and foremost, is the best guarantee that a coin will persevere and thrive on the market. Study its competitors to get a broader perspective.

For example, Monero (XMR) is a privacy-centered coin. It has secured the image of currency of dissidents, whistleblowers, and criminals alike. It has secured the niche and now it cannot be easily pushed over by Zcash (ZEC). Similarly, FUN is a gambling token, Stellar (XLM) works with national banks, and so on.

Another indicator (however insignificant) of a given cryptocurrency’s viability is the number and reputation of online exchanges that listed it. This is why an asset’s price rises after it has been listed on Binance.

How to analyze cryptocurrency trends

Speaking of trends one means either a trend on the price chart or an actively discussed topic: NFT’s, Dogecoin’s pump, play-to-earn games, etc. The trending topic itself will irrationally pump the price of a related asset.

How to analyze cryptocurrency trends: pump and dump

We did an in-depth article on how pump and dump works a while ago. Here is a quick summary: everything that skyrockets in price rapidly, will just as rapidly fall provided that the only reason for the price rally was celebrities advertising an asset. Sure, the price shift may be connected to bitcoin halvings or the ongoing devaluation of fiat money. Learn to distinguish between them.

How to analyze cryptocurrency trends: cycles, patterns, bitcoin halving dates

One of the techniques used to predict crypto prices is based on the assumption that bitcoin has a major impact on every other coin. Therefore, should bitcoin’s price go up, the majority of altcoins are destined to follow. Bitcoin’s price, in turn, is heavily influenced by the halvening dates that happen approximately every four years.

Looking at the price chart, you’d notice repeating patterns that correspond to the cycle’s length, so you can vaguely guess the next accumulation period or the next big dump.

How to analyze cryptocurrency trends: background economy

If you live in a country that is stuck in hyperinflation, any major cryptocurrency will be a better investment than local fiat money, even considering all the risks of the former. It is just one example of how local and global economies may influence crypto prices, so keep an eye on the news.

How to analyze cryptocurrency charts

Basing one’s analysis exclusively on a given coin’s price chart is ineffective: a single Elon Musk tweet can tell you more about bitcoin price tomorrow than the smartest trading bot on earth. Yet, the knowledge of patterns and continuous practice of price guessing, followed by post factum analysis of your predictions, will sharpen your intuition and improve your trading decisions.

How to analyze cryptocurrency charts with third-party software

With the right tools, you don’t even have to do the price guessing and backtracking yourself. Find the right software, test it against real market data samples, and enjoy it work.

How to analyze cryptocurrency market

The market as a whole is a complex system. Although the whole price guessing game is based on the belief that the market is deterministic, no one has invented an infallible divining device so far. Always be on the lookout for new sources of information, communities, coin offerings, airdrops, innovative startups…

It is important to understand both the price chart and the real-world event that triggered a particular price swing. The more opinions and facts you study, the more independent and precise you become in your judgments.

Download Trustee - single multi-currency wallet for crypto
Share

Leave a Reply

Your email address will not be published. Required fields are marked *