How to evaluate any cryptocurrency project using fundamental analysis


The crypto market is different from traditional markets. There are key questions that must be answered when analyzing a project or its assets. Market Analysis Own this piece. NFTFundamental analysis, which is the process of determining the intrinsic value of an asset with the goal of determining whether it is overvalued and undervalued, is a method of analyzing the market. This information can be combined with technical analysis to determine whether an asset is worth investing in or trading. Because cryptocurrency assets lack historical data, there isn’t much to go on. This is because they don’t have any earnings reports or profit and losses statements. To analyze cryptocurrency, you need to do extensive research. This includes looking into its use cases, network, team behind it, vesting schedules, and so on. The right set of factors can help traders determine the fundamental value and potential risks associated with an underlying project. Here are the top 10 steps. Read the whitepaper. This is crucial for long-term, buy and hold investing. This document provides a detailed and intentional overview of a project. The white paper should explain: The project’s goalsThe distribution and use casesThe team’s visionThe technology that powers the tokenPlans to upgrade and add new featuresHow the token is valuable to users. Be skeptical about the claims in the white paper. Project managers can lie or break the truth more often than people realize. Look at your competitors Take a look at your competitors. According to industry sources, almost 40% of cryptocurrencies listed in 2021 are no longer available. Source: CoinGeckoScrutinizing a project’s white paper reveals the use case the crypto asset is targeting and the problem it is trying to solve. The next step is to determine if the use case is viable and desired. Bottom line: Smart investors want to know if this project is better or worse than others. 4. The team behind the project should be looked at. A project is only as good and successful as the people behind it. The whitepaper should include information about each member of team. However, independent research can help you to find out more about them. Are they knowledgeable? Are they trustworthy members of the blockchain community? Have they been involved with any scams or questionable projects? Next, check out the developer community. Find out if there is a public GitHub for the project. You can check the activity and number of contributors to the project. The better the project’s development activity, the more consistent it is. On-chain metrics can be viewed by looking at the blockchain data. Source: Cointelegraph Markets ProThe data can be pulled from websites or APIs — such as on-chain analysis, data charts and project reports — specifically designed to inform investment decisions.Some of the data worth considering:Transaction count — a measure of activity taking place on a network. The greater the activity, the better. Transaction value — how much money has been transacted in a given time period. The higher the number, the better. Active addresses — How many active blockchain addresses are at any given time. The more active addresses, the better. Look at the tokenomics Tokenomics: What are the financial metrics? Market cap, trading volume and liquidity are the most important metrics. These include: Market capitalization — the network’s value, which is the hypothetical cost to purchase every unit of the asset. The “market cap” is a measure of the network’s growth potential. It is calculated by multiplying current price by the circulating supply. It indicates whether a token is liquid. Liquidity — This indicator measures how easy it is to buy and sell a token. 8. The more liquid a token, the easier it will be to sell it at its current trading prices. Community. A community can help a token appreciate in value. Social media excitement fueled the price rises of Meme coins like Shiba Inu and Dogecoin. Source: Cointelegraph Markets. A community backing a coin can be a powerful catalyst. Here are some questions to ask: Is there enough shilling accounts? Are there many developers? Remember that a token’s value will only rise if there is market interest. Marketing There are approximately 21,910 cryptocurrencies investors can choose from. This makes it more likely that the token’s price will appreciate. Marketing There are currently 21910 cryptocurrencies investors have the option to choose from. That’s a lot of competition. If the core product is already available, you can test it. This one may be difficult for someone who is only interested in investing in the underlying token. However, let’s say one is considering an investment in Ethereum (ETH).Since Ethereum is a decentralized global software platform, a functional, secured digital network technology would demonstrate for certain how the platform actually works.Knowing this could definitely help inform a potential investing decision.After all, if the platform is hard to use, time-consuming or otherwise creates more problems than it solves, it may be wise to steer clear of investing in such a platform until these issues are addressed.So there it is — 10 steps for sound fundamental analysis to help evaluate the profit potential of any asset before any investing or trading.See how Cointelegraph Markets Pro delivers market-moving data before this information becomes public knowledge.Cointelegraph is a publisher of financial information, not an investment adviser. We don’t offer personalized or individualized advice on investment. Cryptocurrencies can be volatile investments that carry high risk, including the possibility of total and permanent loss. Past performance is not indicative for future results. All figures and charts are correct as of the date of writing, unless otherwise stated. Strategies that have been tested in real life are not recommended. Before making any financial decisions, consult your financial advisor. All ROIs are correct as of February 16, 2023.


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