Navigating the crypto world can be challenging, particularly with new coins being introduced into the market regularly. Whether you’re a skilled or novice investor, researching and analysing cryptocurrency is key to identifying legitimate projects with potential, which can help ensure profitable investing. Discussed below is how to research and analyse cryptocurrency.
- Explore social media
People share opinions, predictions, and news about cryptocurrency prices, which can spread very fast and reach many people within a short period. When millions of people read the same information, it can impact their decisions to sell or buy cryptos, causing prices to rise or fall. Understanding the way social media influences ETH price and the prices of other cryptos can help you make informed decisions when investing. However, you should verify the essential information you find on social media and stay rational to ensure successful investing.
- Conduct technical analysis
Technical analysis in cryptocurrency involves studying price patterns, market sentiment, and trends to forecast future ETH price movements through reliable exchanges like Kraken. This provides investors with invaluable insights that enable them to make informed decisions. Conducting technical analysis enables you to:
- Time entries and exits: With the help of technical analysis, you can identify optimal exit and entry points for your trades based on signals and trend analysis. For instance, technical indicators can help you identify resistance and support levels, spot momentum shifts, and be directed on where to set sell and buy orders, stop losses, and take profits
- Facilitate sound risk management: Using technical analysis to identify resistance and support levels can help you set precise stop losses and take profits, minimising risks
- Mitigate emotional biases: Relying on factual information and technical indicators eliminates the risk of making crypto investing decisions based on greed and fear. Technical analysis enables you to stick to a rational strategy based on patterns and data, preventing psychological trading errors and minimising impulsive reactions
- Read the whitepaper
A whitepaper is a document that outlines the technical specifications and primary features of a particular cryptocurrency. It describes a project’s:
- History
- Purpose
- Technology
- Applications
- Future projections and more
Whitepapers also provide equality and transparency by publicizing a project’s critical information. Reading a cryptocurrency’s whitepaper gives you insights into the issues the token is attempting to address, plus the developer’s values.
With this background information, you can decide whether a project or cryptocurrency resonates with your investment objectives. Using a cryptocurrency’s whitepaper, you can:
- Identify promising projects and possible red flags
- Track whether a project is adhering to its original objectives and plans
Reading a project’s whitepaper before starting crypto trading helps you decide whether to invest in a particular coin.
- Evaluate a coin’s profile
Analysing a crypto’s profile offers invaluable context regarding its market presence. While historical performance doesn’t warrant future results, market cap, trading volume, and the current price can give insight into investor stability and sentiment. High liquidity and trading volume usually show tenacity and strong interest in the market.
- Determine a crypto’s real-world applications
A crypto’s real-world uses indicate its potential for long-term success and relevance. Tokens used by platforms like PayPal and businesses usually have more liquidity and stability. A well-established cryptocurrency, such as Bitcoin, usually enjoys cross-border acceptance and other uses like DeFi applications and supply chain management, making it a more solid investment option.
Endnote
Considering how risky crypto investing can be, thorough research and analysis are key to making informed decisions. Researching and analysing cryptocurrency can help you identify legit crypto projects, determine their viability, and safeguard yourself from cryptocurrency scams.