How to Analyse Cryptocurrency Before Buying: a Comprehensive Guide

By Ben Knight January 10, 2024

Launching into building a crypto portfolio can be tempting for a first-time investor. Especially during a bull market, a sea of green and stories of overnight riches can build FOMO to the point you feel pressured to smash that buy button without research. Sometimes, people can luck out, but over the long term, a rudderless investment strategy will eventually sink your portfolio. 

It’s easy to tell people to DYOR (do your own research). But that doesn’t answer the question of how

So, let’s find out.

How to analyze cryptocurrency

Would you buy a house without going to an inspection? What about a second-hand car without giving it a test drive? Investing in cryptocurrency without performing any analysis is akin to these financial sins. Going in blind is a surefire way to stumble into fake projects, scams or underperforming coins. By analysing a project before parting with any funds, you can put money toward a vision you believe in, while still keeping an eye on strong financial fundamentals and generating profits.


There are several approaches to analysing cryptocurrencies, and no one way reigns supreme. The best method for conducting due diligence is a combination of ideas and metrics. Generally speaking, there are two main techniques for analysing digital assets – fundamental and technical.

Fundamental analysis of cryptocurrencies

Cryptocurrency fundamental analysis is likely the first step for novice investors. It involves assessing a project, its place within the industry, its goals, and various supply and market metrics. 

The first thing to do is read through a project’s whitepaper. Try to understand its vision and how it aims to disrupt the market. Initially, getting lost in technical jargon can be easy, but thinking of the bigger picture can help. For example, a blockchain like Ethereum attempts to revolutionise finance by providing users new ways to generate income and utilise their assets. 

Asking yourself some questions can help break down the project’s value:

  • Are its goals achievable? 
  • Does it have a strong community?
  • Do the developers and leaders have a good background? What were their past projects or roles?
  • Is there competition that does the same thing, but better?
  • Is its infrastructure reliable?

Prospective investors can then look at basic figures using an analysis platform like Coinmarketcap. Market capitalisation is a good way to gauge how much money is behind a project. Big market cap assets tend to have large, active communities with more stable price movements.

A quick look at token supply metrics can also be quite enlightening. Bitcoin is a perfect example, as there can only ever be 21 million BTC in circulation. As the number of BTC is capped, if supply dwindles while demand increases, it will create upward pressure on the asset’s price. Coins with unlimited supply often rely on other factors to drive value.

Related: What is Bitcoin? 

Technical analysis of cryptocurrencies

Cryptocurrency technical analysis is a little more complex than fundamental analysis. Still, even complete novices can benefit from its application. Simply, it involves looking at a crypto’s price charts and using trends and indicators to predict future price movements.

The most common form of technical analysis involves a candlestick chart, which helps traders visualise the price action of a coin over time. It can reveal potential short- and long-term trends that might inform a trading strategy. For example, a red (bearish) candle after a sustained price rise could suggest a reversal of price action is on the horizon.

Another element of technical analysis involves indicators. These mathematical equations analyse historical data such as trading volume or crypto price movement. Indicators can be added to a candlestick chart to assess potential trends and search for buy and sell signals. They are most effective for short-term swing traders who identify profit opportunities based on trend reversals but can be helpful for anyone.

Understanding candlesticks

  • Candlestick Color: Candlesticks are typically green or red, indicating positive (green) or negative (red) price movement. Traditionally, Japanese charts used white for positive and black for negative, and some traders still use these or other color schemes.
  • Time Interval: Each candlestick represents a trading period, ranging from short intervals like one-minute for day trading to longer ones like one week for long-term strategies. Traders may use multiple timeframes for comprehensive analysis.
  • Opening and Closing Prices: The body of a candlestick shows an asset’s opening and closing prices within the interval. Green candles open at the lower edge and close at the upper, while red candles open at the upper edge and close at the lower.
  • High and Low Prices: The wick of a candlestick indicates the highest and lowest asset prices within a specific time interval. The top of the wick marks the highest price, and the bottom represents the lowest price in that period.

Using indicators like RSI

A prominent technical indicator is the Relative Strength Index (RSI). This is called a momentum indicator that measures the speed of a trend’s upward or downward price movements. Based on this historical data, the RSI can output an underbought (a reading of >30) or oversold (a reading of <70), which can help determine if a cryptocurrency provides value.

Predictive strategies in cryptocurrency

Nobody can know for sure whether a coin will go up or down in the future. However, using a combination of fundamental and technical analysis, traders can determine current price trends and use it to forecast future movements. 

Investors must also consider macroeconomic trends when deciding whether to buy or sell a crypto asset. For example, a global recession or geopolitical instability can cause an entire market to crater, even if a cryptocurrency’s fundamentals look appealing. That’s why it’s necessary to look at past market cycles and how they’ve reacted to significant events before investing. For example, the COVID-19 shutdowns in March 2020 caused the price of BTC to drop by 50% in just a few weeks.

Within the crypto sector, past bear markets have lasted approximately a year, while it can take over two years for the price of BTC to eclipse its previous high. 

At an even more micro level, each Bitcoin bull run has been preceded by a halving event about 6-12 months before reaching a new all-time high. Putting these two cryptocurrency market trends together, someone might target an entry point of one year before halving as a potential market bottom. That said, it’s incredibly important to remember that the crypto market is constantly evolving and historical trends are no guarantee of repeating.

Risks and caveats in analysis

Being well-researched, analysing market trends and performing technical analysis can be a fantastic way to mitigate risk when investing in cryptocurrencies. But there is no way to guarantee a profit – sometimes, even the best, most well-timed investments can misfire.

Analysis can often be quite subjective. Traders often look for information that confirms their preconceived biases – and naturally find them. However, sometimes their intuition is wrong, or they misinterpret a trading signal that results in a bad investment.

Thankfully, there are a few strategies you can put in place to handle these uncertainties:

  • Never invest more than you can afford to lose. Be prepared to lose your entire investment if disaster strikes.
  • Everybody makes bad trades. The key here is to learn from your mistakes and cut your losses. Ask yourself what went wrong – did you get sucked in by FOMO and hype? Did you misinterpret a market trend on a chart? 
  • Never rely on one piece of information. This applies to fundamental analysis (use multiple sources) and technical analysis (combine market trends with multiple technical indicators if possible).

Developing your cryptocurrency analysis plan

Not all crypto investors will have the same goals. Some may be looking to enter the day-trading game and make hundreds of trades every hour. Others might be starting their investment journey and want to put aside a few hundred dollars for a long-term hold. Either way, it’s important to take note of your mission and ensure it fits within your current financial situation. It would be a poor decision to embark on a high-frequency trading strategy if you’re struggling to make ends meet, for example.

Regardless, all traders can benefit from analysis in one way or another. The first step is to ensure you’re across all the basic terms and understand how they might impact an asset’s price. There’s less value in reading a project’s whitepaper if you don’t know what a blockchain is, or how it competes with other prominent cryptocurrencies. Learn how market caps and supply have historically influenced price and how to read basic crypto charts. Finding reliable platforms for quickly assessing a crypto ecosystem’s health – for example, on-chain trading volume – can be a huge help, too.

Once you have a base knowledge level and are comfortable with several tools (like a block explorer), you are ready to get analysing!

While not always necessary for a long-term HODLer, it’s valuable to dig deeper into technical analysis if you plan on being an active investor. This might involve signing up for a trading course, using a crypto education platform, and consuming videos from proven, professional traders.

Signing up to a crypto education platform

The cryptosphere is still in its infancy, and the amount of conflicting information on the internet can be confusing. It’s why finding trusted, educational platforms that break down tough concepts into digestible bites can be so valuable to those just getting started. Whether you want to learn about blockchain or advanced arbitrage trading strategies, several top-tier companies are operating in this space to choose from.

Free options like Swyftx Learn, Binance Academy and Coinmarketcap Learn are all fantastic for beginners who want to dip their toes into the crypto game.

For more serious investors – no matter their expertise – several alternatives provide personalised help with building a crypto portfolio, understanding market trends and participating in a like-minded community. On top of the basics, these companies have built a swathe of actionable resources for traders, including live buy/sell recommendations built on comprehensive research and portfolio advice tailored to your unique financial goals.

Three of the best for Australian customers include:

  • Empire Crypto Trading: Australia’s fastest-growing crypto community. Empire’s platform provides daily insights and in-depth crypto research to help you find good investing opportunities. 
  • Investified: Easy-to-digest crypto content and analysis that saves you time. Enjoy 1 on 1 sessions with their analysts, ready to answer all your queries and assist you throughout your journey in the world of crypto.
  • Collective Shift: Dedicated altcoin research reports, great for finding hidden gems. 


Learning to analyse a cryptocurrency might be the most important path along someone’s investment journey. It is the best way to avoid making poor investment decisions, protect your money, and maximise potential profits. Fundamental analysis can be an excellent method for identifying high-quality projects with long-term viability, while technical analysis can reveal a lot about a market’s (or coin’s) current trends and prospective buy/sell opportunities. 

Making informed decisions is the key to becoming a successful investor. Not only does it minimise some of the biggest risks that come with trading in the crypto market, but it also allows you to contribute to something you truly believe in. The cryptosphere is poised to revolutionise how the world views personal finance – and with the right mindset, you can be a part of the wave.

Ben Knight

Ben Knight

Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.