Many beginner investors are wondering how to analyze a cryptocurrency before buying it. How to understand whether you need to buy that or another token or whether it will fall soon? There are several types of in-depth analyses of the crypto market, but studying them takes a lot of time and effort. However, you can start doing basic crypto asset analysis right away.
So, how to quickly and easily choose cryptocurrency for investing? In this article, we will consider in detail the main criteria for analyzing cryptocurrency and learn how to choose worthwhile projects for investment.
What Is a Crypto Analysis & Why Is It Important?
To become a successful trader or investor, you need to understand the laws of the market. It is also important to know when, why, and how a particular coin will move. You can find this out by studying different types of crypto market analysis. Currently, the following types of crypto analysis exist:
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- Technical analysis. It shows the rise or fall in the price of an asset in the short term.
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- The Elliott Wave theory is a theory that allows you to predict the laws and behavior of the entire market in the long term.
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- Fundamental analysis. It shows the dependencies of events taking place at the global level and cryptocurrency price movements.
All these methods of analysis are extremely effective. If you master one of them or all at once perfectly, then you can be a good trader and make good money on cryptocurrency.
Still, as mentioned earlier, to master at least one of them at the proper level, you need to spend a lot of time on theory and practice. Thus, to achieve at least some result instantly, you can use another type of analysis:
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- Primary analysis. How does it work? Well, you choose one coin you are interested in and analyze it according to several parameters. For example, digital indicators, social networks, and program code. The bottom line is that you check out all possible available information about the coin. And based on this information, you make a decision: does this coin have growth potential, and is it worth buying? This often applies to coins that have recently entered the market, but bitcoin can also be analyzed in this way.
Cryptocurrency Analysis Criteria: Numerical Data
The analysis should begin with a search for basic information about the coin. To do this, go to the aggregator of all cryptocurrencies, CoinMarketCap. Find the desired coin and start searching for data. It is advisable to enter everything in a table for clarity.
The first thing to do is to look at the current price and find the lowest price for the last year on the chart. Now let’s calculate the percentage of the minimum price. To do this, divide the minimum price by the current one and convert it into a percentage. The value will tell you how much the coin has grown in relation to its low during the year. If the value is too large, it often makes no sense to invest in such a coin.
By analogy, just search for the highest peak value of the coin for the last year and carry out similar calculations. We divide the peak value by the current one and convert it into a percentage. This indicator shows how much the coin has fallen to date in relation to its peak value. If the coin has fallen in price at least 50% below its peak value, then this indicates a successful entry point.
What Else Is Worth Paying Attention To?
In addition to the percentage of maximum and minimum prices, it is necessary to consider two more factors: emission (number of coins issued) and market capitalization.
A large total market cap indicates that a project is promising and sustainable, and its coin may have potential development.
You need to calculate the coin’s emission manually. Just check how many tokens are currently issued and how many are planned to be in circulation. Divide the first value by the second and get the current emission percentage. The higher the value is (closer to 100%), the better coin is since there will be no new issue of additional tokens in the market (that is, an increase in supply), indicating that the chance of a price drop is reduced.
Cryptocurrency Analysis Criteria: Social Media Analysis
The second step is to analyze the social networks of a project — highlight two main subjects: the community’s activity and the interest of major players in the project. Your best bet is to check out the project’s Twitter. If the community is active, leaves a lot of comments, and is interested in the project, then the project is potentially attractive for investing.
Also, via this website, you can find the project’s Twitter account you need and see what large investment funds, crypto-influencers, and other projects are subscribed to it. The more popular accounts subscribed to the project, the more powerful it will be in the future in terms of investment.
Cryptocurrency Analysis Criteria: Additional Factors
There are several other important factors to consider when analyzing a coin:
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- Trading volume. It is the easiest factor to check — you just need to go to CoinMarketCap, select the desired token and see its trading volume for 24 hours. If it is too small, then it is not recommended to invest in such a coin since it can’t boast high demand and liquidity. Thus, such an investment can be risky.
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- Code audit. It is very important that a program code of a project be checked by one of the major audit companies. This will ensure that the project is clean and the chance of fraud is minimal. You can also check this indicator at CoinMarketCap.
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- Events. It is worth following the official news of a project on social networks, studying the roadmap, and learning about future plans. This will help you determine in which direction the project is moving and, most importantly, whether it is worth investing in. It is better to learn about hot news and events in advance and buy tokens prematurely.
What Is the Best Place to Buy Cryptocurrency?
If you’re wondering where to buy your first crypto, you should definitely think about doing it at Switchere. On our platform, you have an opportunity to buy all leading cryptocurrencies in the fastest and most convenient ways using any available payment method.
Switchere is one of the most reliable online exchanges for buying cryptocurrencies. The company is a licensed provider of financial services, with guaranteed legal compliance and a secure infrastructure system for fast crypto exchange services at fair prices.
Switchere is characterized by the fastest order processing and instant delivery — in fact, you get your ordered amount of crypto within minutes after making a payment. Moreover, we offer some surprising bonuses! Users of our platform enjoy a 0% service fee for the first order.
Conclusion
As a result, we can say that the primary analysis of a cryptocurrency is a general collection of information and its correct interpretation.
It’s also worth noting that you should not make a decision to buy a particular token solely based on one or several points of analysis — you should have a complete picture. And the decision to buy a token should be made solely based on the combination of all of the above factors.
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