Before buying digital coins, crypto investors want to be sure that the deal will be profitable. Crypto-Auditor’s experts explain what knowledge and tools you need to have to effectively make decisions about entering an asset. So, let’s see how to analyze cryptocurrency!
To Start Off: How to Research Cryptocurrency
Successful investments are hard daily work based on the cryptocurrency market analysis that includes:
- Studying market trends
- Monitoring specialized forums and social networks
- Analyzing technical analysis and
- Correctly compiling a portfolio.
The complexity of investment activity is that it is fraught with risks and a huge psychological burden, which is difficult for beginners to withstand.
Also, successful investments do not imply that the investor does not make the wrong strategic steps at all, even professionals make mistakes.
So, the main thing is the total ROI (return on investment), distributed across all assets in the investment portfolio.
How to Evaluate Cryptocurrency: The First Steps
Any financial market, including the cryptocurrency market, does not tolerate a superficial approach and will punish you with a loss. So, one of the decisions is to apply technical analysis crypto or cryptocurrency sentiment analysis. Of course, no cryptocurrency research paper would be a helpful tool—but our guide will!
In order for a beginner to consciously find the point of entry into an asset, you need to have a basic understanding of the economy, the rules for price formation in the market and know the basics of technical analysis and cryptocurrency trend.
Exchange trading has a century and a half of history, while the crypto market is barely 10 years old. A crypto investor can find many answers in traditional markets. Analysts advise you to study the elementary fundamentals of technical analysis:
- Moving averages
- Key support, and
- Resistance levels.
It’s worth studying the basic concepts of diversifying the investment portfolio and understanding which cryptocurrencies exist in principle and whether they can be categorized somehow.
Separate asset classes include digital coins used as means of
- Blockchain platforms for DeFi and smart contracts, as well as
- Tokens from crypto exchanges and decentralized trading platforms.
You shouldn’t completely ignore technical analysis, but in general, if we are not talking about numerous transactions during the day, then you can do without it.
An investor should take the time to study the technology itself in order to understand what he is investing in.
Top 4 Things to Know Before Entering the Crypto Market
Fundamental factors that a crypto investor should understand before buying digital coins:
- There is no endless growth
- You are guaranteed high profitability for a month, and in exchange they simply ask you to send a referral link and “bring a friend”? This is most likely a deception
- Have you read the description of the project, but did not understand anything, because there are too many technical terms that you do not understand? Don’t invest. You will not be able to reasonably assess the prospects of an incomprehensible project
- Be sure to check your country’s tax laws regarding digital assets. Think about it now before buying.
You have compiled an investment portfolio, but a couple of projects—contrary to your forecast—are steadily getting cheaper. You may think that cryptocurrencies are not for me. Throw it away, even multibillion-dollar fund managers do not have a fully growing investment portfolio under the most extensive research cryptocurrencies.
How to Determine the Potential of a Token
How to analyse cryptocurrency? Or how to evaluate a cryptocurrency token?
If you invest in Bitcoin or Ethereum—the two of the most popular and stable coins—then it makes no sense to conduct in-depth analysis, since these coins are promising a priori and a lot of crypto sentiment analysis has been made.
When buying any other token, you need to apply the approach of a venture investor and understand that you are not investing in a digital coin, but in a startup and its team.
In this case, within the cryptocurrency analytics, you need to evaluate
- The idea of the project
- The reality of the implementation of its idea
- The economics of the project
- What it will earn
- The use of the token
- The team and its background
- Whether someone has invested in this project from large funds and, of course,
- What stage it is on now.
According to statistics, 95% of startups cease to exist in the first year.
Cryptocurrency Data Analysis: Crypto Investor Tools
You need to study the training materials and essentials of the cryptocurrency fundamental analysis. This is a great reference for anyone just starting to dive into the world of cryptocurrencies.
You can also explore the community by reading comments on Reddit and/or follow the movement of large amounts of digital coins using Twitter’s Whale Alert service.
For more advanced financial market participants, you can use the services
- CryptoQuant or
Within the cryptocurrency market research framework, it is important to analyze how these metrics behave during periods of market downturn and rally in order to identify patterns.
In any case, you just can stick to Crypto-Auditor, and keep in touch with us to know all the most recent news and tendencies about the cryptocurrency market!