Cell-free DNA (cfDNA) refers to short fragments of acellular nucleic acids detectable in almost all body fluids, including blood, and is involved in various physiological and pathological phenomena such as immunity, coagulation, aging, and cancer. In cancer patients, a fraction of hematogenous cfDNA originates from tumors, termed circulating tumor DNA (ctDNA), and may carry the same mutations and genetic alterations as those of a primary tumor. Thus, ctDNA potentially provides an opportunity for noninvasive assessment of cancer. Recent advances in ctDNA analysis methods will potentially lead to the development of a liquid biopsy tool for the diagnosis, prognosis, therapy response monitoring, and tracking the rise of new mutant sub-clones in cancer patients. Over the past few decades, cancer-specific mutations in ctDNA have been detected using a variety of untargeted methods such as digital karyotyping, personalized analysis of rearranged ends (PARE), whole-genome sequencing of ctDNA, and targeted approaches such as conventional and digital PCR-based methods and deep sequencing-based technologies. More recently, several chip-based electrochemical sensors have been developed for the analysis of ctDNA in patient samples. This paper aims to comprehensively review the diagnostic, prognostic, and predictive potential of ctDNA as a minimally invasive liquid biopsy for cancer patients. We also present an overview of current advances in the analytical sensitivity and accuracy of ctDNA analysis methods as well as biological and technical challenges, which need to be resolved for the integration of ctDNA analysis into routine clinical practice.