How to Identify Undervalued Cryptocurrencies
If you’re looking to switch from investing in stocks to investing in cryptocurrency in 2026, you might be wondering if some of the same tactics in stock investing can transfer over. While some skills can, there are several that don’t.
Identifying undervalued cryptocurrencies is not the same as identifying undervalued stocks. Read on to learn some tips and tricks for identifying undervalued cryptocurrencies.
Why Do People Search for Undervalued Cryptocurrencies?
In the stock market, searching for undervalued stocks is a common tactic for turning a profit. It’s exactly what Jordan Belfort did in The Wolf of Wall Street and how he came to make his millions. Sure, there were some other illegal dealings later on that landed him in jail, but his basic tactic is something traders still use today.
Basically, when you find something that is undervalued, you are able to buy it with confidence, knowing that the price will increase in the future as others discover the value of the stock you bought. While this isn’t a “sure thing,” it is one way to minimize your risk when investing in cryptocurrency.
Tips for Finding Undervalued Cryptos
1. Learn the Basics of Crypto
First and foremost, before you start combing through charts and whitepapers, you need to know the basics of how a cryptocurrency functions. Take a little time to learn about blockchain technology and the industry. This way, you will be able to know what you are looking at as you work your way down this list.
Feel free to start here: Your Basic Crypto Questions Answered.
2. Check the Market Capacity
Market capacity is an important indicator in cryptocurrency. It often can indicate how long a product has been around, as well as how much it can be expected to expand or grow in a short period of time.
You can’t just look at the market capitalization alone, however. You have to take the time to compare it to similar projects. For example, if you are looking at a DeFi exchange token, you’ll want to compare the market capacity to similar projects like PancakeSwap and SushiSwap. If the market capacity of the project you are looking it is significantly lower than these two projects, then you might just have found an undervalued token.
Don’t buy just yet, however, because you also need to look at how long the token has been around. If it’s been around for more than 5 years and still lags that far behind its competitors—then run, as it might be an abandoned or crashing project. But if it launched within the last year, it’s more likely to be undervalued and a good buy.
3. See Who’s Backing It
It can be hard to know what is legit and what is a scam when you are first getting into investing in cryptocurrency, and we don’t expect you to know everything. This is why you should check and see who is backing the cryptocurrency before you buy. If no one is backing it, this may be a sign that it isn’t a real project.
That being said, even if a cryptocurrency has big-name backers, look at who they are. Because while someone like Kim Kardashian is famous, she doesn’t know a scam any better than you. But if Mark Cuban is backing a project, it is more likely to be legit.
The most legit backers, however, are institutional investors, who have the tools to fully vet these projects and their owners. And even then, they sometimes find themselves mixed up in a scam—same as you.
4. Read the Whitepaper
Now we know this isn’t the fun part, but you need to read the whitepaper of any token you plan to invest in. Not only will this let you know how they plan to run and scale things, but it will also ensure your values align with theirs. The last thing you want to do is invest in something with potential that has no plan to take advantage of that potential.
And if the project you’re interested in doesn’t have a whitepaper? Do not buy it.
5. Look Into the Team Behind the Project
As you scour the token website for the whitepaper, you’ll likely come across the names of the CEO, CFO, and more. Take this time to investigate the team behind the token and their past projects on LinkedIn and any other business-based websites you have access to. If they have a lot of failed projects, know this one might be another. If they have a lot of successful projects, then you’re probably okay to buy.
If you cannot find anything out about the owners, and the token isn’t Bitcoin, then you’d best get out of there, and fast.
During this period, also check the social media accounts of the project. If the accounts aren’t active and putting out useful information, the project may already have fizzled out, even with a great team behind it.
6. Is It Useful?
The last thing you need to consider is whether or not the world actually needs said project. For example, a token that helps people locate antiques might have all the right backers and a stellar whitepaper, but just not be something the world needs. This may mean that growth will stall simply because of what the token does.
The same goes for industries that are oversaturated. We love a good DeFi exchange for example, but there are so many these days, we definitely wouldn’t invest in another new one—even if we really liked the token. Unfortunately, in full markets, even the best projects will fail.
Of course, if it is something you will personally use, go ahead and invest, just be realistic on the growth you can expect.
Overall, it can be difficult to find undervalued cryptocurrencies. But, if you take the time to learn about crypto, you may have a chance. Start by checking the market capacity as well as the history of the project. Then, look at backers, whitepapers, and teams. If you’ve made it this far, as long as the product is useful, you might just have found yourself a true undervalued cryptocurrency.
