How To Analyse Cryptocurrency Before You Invest?


Before investing in cryptocurrency, learn the principles of trading and investing. Traders and investors are using these analytical techniques in the market to understand the price movements of the coins, create models, and launch their analysis papers. In light of this, let’s examine cryptocurrencies’ fundamental, technical, and on-chain analyses.


Trading risky assets like cryptocurrency call for some expertise. A learning curve is involved in choosing a strategy, comprehending the huge world of trading, and mastering technical and fundamental analysis.

Some technical analysis knowledge can be gained from the financial markets. The same technical indicators used in forex, stock, and commodities trading are popular. RSI, MACD, and Bollinger Bands aim to forecast market behaviour. The bitcoin industry enjoys huge popularity.

Although the methodology is comparable to that used in legacy markets, it is challenging to evaluate crypto assets using the tried-and-true instrument. We’ll try to find some metrics in this article that you can utilise to create your indicators.

What Are The 3 Ways To Analyse Cryptocurrency?

  1. Fundamental Analysis For Cryptocurrency

An extensive investigation of all the data on a coin is conducted throughout the crypto fundamental analysis process. It employs a combination of quantitative and qualitative financial metrics. The ultimate goal of fundamental analysis is to ascertain a coin’s intrinsic value.

The intrinsic value can then be used to determine if the crypto asset is overvalued or undervalued by comparing it to the current market price. Investments set that are undervalued may give a buying opportunity. In contrast, an overvalued item may indicate it is time to take profits.

Do meme coins, such as Dogecoin, have any intrinsic value?

There isn’t.

However, we get more knowledgeable when we use fundamental analysis techniques.

What is Dogecoin, then?

First, it is missing critical fundamental value propositions like a whitepaper, a plan, and a developer staff. It is one of the most well-known cryptocurrencies, with a market cap in the tens of billions and a 24-hour volume in the hundreds of millions. Even Mark Cuban’s NBA team, the Dallas Mavericks, embraced it as a ticket payment method, demonstrating its usefulness.

Although the fundamental analysis could suggest that Dogecoin is overvalued at $1, at $5, it might be an excellent investment.

Essential data to guide fundamental analysis:

  • Market cap
  • Volume
  • Tokenomics
  • Total value locked
  • Roadmap
  • Team members
  • Community size and engagement
  • Rate of network growth
  • Rate of adoption
  • Whitepaper
  • Use case
  1. Technical Analysis For Cryptocurrency

Technical analysis examines previous price movements to predict the direction of the market. Each event’s likelihood is calculated using statistical indicators and trends. Many investors rely on visual charts to recognise important signals like support and resistance. Technical analysis is ultimately used to identify buy and sell signals.

It’s crucial to remember that traders who use technical analysis never anticipate being correct all the time. Even a trader who wins only 55% of the time can make tons of money. They employ risk management techniques, such as establishing auto sales and investing only a percentage of their holdings on a single trade, to control risks for the occasions when the market goes in the opposite direction of what their indicators anticipated.

Take the bitcoin chart from late July 2021 as an example. The Relative Strength Index (RSI), an indicator that assesses overbought or oversold conditions, is shown by the purple line in the lower part of the chart. The technical trading analysts noted that the market was approaching oversold territory and that some profit-taking might occur.

Researchers then observed that the 50-day moving average was rising, confirming what appeared to be a bullish trend. In conclusion, our analysts predicted using technical trading techniques that the market would likely continue to grow despite the possibility of a brief price decline shortly. You will recall that is exactly what took place.

Popular technical analysis tools include:

  • Moving average convergence divergence (MACD)
  • Relative Strength Index (RSI)
  • Bitcoin price Simple Moving average (SMA)
  • Moving Average (50,200) Crossover
  • The on-balance volume (OBV)
  1. On-Chain Analysis For Cryptocurrency

The on-chain analysis examines the blockchain’s open data. The cryptocurrency industry is the only one where it is a developing field, and traders use it to more accurately forecast market movements and assess market sentiment. Finally, traders employ on-chain analysis to determine the factors driving the purchasing and selling of various market participants, such as miners selling to cover expenses or hedge funds taking profits.

With on-chain analysis, traders examine how various market players, including institutional investors, exchanges, miners, and retail dealers, are acting. They use multiple indications, including transaction volume, wallet balances, and coin dormancy.

The percentage of miners and significant holders of bitcoins has dramatically fallen while the number of coins held by regular investors has significantly climbed. This is a crucial indicator since it demonstrates how the network’s decentralisation is growing over time.

Additionally, traders can use the aforementioned chart to determine how much impact various market participants have on the price.

On-chain indicators with insight include:

  • Number of active addresses
  • Number of transactions
  • On-chain volume
  • Hash rate
  • Miner revenue
  • Total value locked (TVL)
  • Market value to realised value (MVRV)
  • Network value to the transaction (NVT)
  • Realised cap

How To Combine All Three Cryptanalysis?

Though each of these analytical techniques is useful on their own, when combined, they are even more effective. A single metric by itself might not be helpful. But by combining all of your analysis techniques, you may create a captivating image of the market, much like a thousand tiny brush strokes.

Of course, none of the three must coincide to make a deal. You can enter and exit positions as the market shifts by maintaining your risk management procedures and making the proper allocations.

Frequently Asked Questions

Can You Predict Crypto Using Analysis?

Yes, albeit there is some debate over how accurate these predictions are. There is always a chance that something unexpected will occur in the cryptocurrency market, sending prices skyrocketing or plummeting to record lows.

Are Crypto Price Predictions Accurate?

They are frequently not. We cannot predict the future. Hence it is erroneous to believe that we can predict events in detail. Like virtually all financial predictions, predictions about cryptocurrencies are frequently off, especially as they get further out in time.