What Is Fundamental Analysis of Cryptocurrencies?

The Concept and Necessity of Fundamental Analysis of Cryptocurrencies

When it comes to understanding the value and prospects of a cryptocurrency, it is important to consider the main factors that determine its potential.

Fundamental analysis is a way of evaluating an asset that takes into account its economic condition. Traders examine:

• the development team;
• the asset’s performance and use cases;
• blockchain technology;
• the level of adoption of the asset;
• economic model.

If you manage to correctly implement the fundamental analysis, trading will be more successful, because you will be able to determine the intrinsic value of the token. Undervalued coins are bought, and overvalued coins are put up for sale. This method is more suitable for medium and long-term investments.

Fundamental Analysis Tools

To successfully and quickly conduct fundamental market analysis, traders use specialized services and platforms:

• TradingView is an analytical platform and social network for traders and investors. Up-to-date information for analysis is available in the “Community” section.
• Messari is an aggregator of up-to-date data on crypto, which allows for researching digital assets and the general situation on the market. The platform regularly publishes news, articles, and announcements of expected updates, token sales, and internal votes in crypto projects.
• Investing.com is a platform with the latest news and analytics, charts and screeners of cryptocurrencies, economic calendar, and other useful information. In addition, on the platform, you can build an investment portfolio for free and immediately get up-to-date information and financial indicators on selected projects.

4 Most Useful Steps to Determine the Value of an Asset

Having found out what fundamental analysis in trading is, let’s understand what steps you need to take to determine the real value of a cryptocurrency.

Study the Whitepaper

This is a technical document that contains a detailed description of the main technical, economic, and operational aspects of the project. Pay attention to the purpose of the project’s creation, its roadmap, practical value for users, and token characteristics.

Experts advise to be skeptical about studying the Whitepaper. The creators of “pump” projects may intentionally falsify and remove information from the document. Check if the data is true, if it was copied from another project, and how realistic the goals are.

Analyze Financial Performance

Using the financial analysis tools described above, you can find out the capitalization of the cryptocurrency, trading volume, and ways of distributing coins. Also, pay attention to liquidity — the higher its level, the better.

Check Onchain Metrics

This is data from the blockchain. For fundamental analysis, you need to consider the number and size of transactions, hash rate, number of tokens in staking, and the size of commissions. The higher the network activity, the higher the real value of the asset.

Study the Tokenomics of the Project

Determine the effectiveness and usefulness of the project, find out what problem it solves, and how relevant it is. The market’s perception of the cryptocurrency depends on this. Note that scammers may invent problems themselves to make it seem like they are solving them through their projects.

Conclusion

Fundamental analysis of financial markets allows you to conduct successful investment activities. According to its results, traders determine the intrinsic value of an asset. Overvalued tokens are sold, and undervalued ones are bought. When performing the analysis, tokenomics, financial performance, project goals, and community and market perception of cryptocurrencies are taken into account.

Looking for digital assets for investment? With the help of ObmenAT24, you can buy cryptocurrency in Ukraine with minimal commissions. Security and efficiency are guaranteed!