Fundamental Analysis for Crypto-Assets
It is not as hard as some people claim - but also not as effective as others wish
For Beginners: What is Fundamental Analysis (FA)?
Wikipedia’s definition of fundamental analysis is as follows:
“Fundamental analysis is a form of financial analysis. It attempts to determine the fair or appropriate price of securities (“intrinsic value”). Unlike chart analysis, it is not based on a consideration of price trends, but on business data and economic environment of a company, called fundamental data.“
Fundamental analysis of crypto-assets is somewhat different from the analysis of securities, as in the case of companies one can refer to concrete figures, e.g. annual reports, and draw conclusions from capital flows.
Fundamental Analysis Isn’t Easy
Fundamental analysis is an active process that takes time if done appropriately. There are many aspects to consider to determine how the price of a crypto-asset might develop in the long term. However, it is very different from the analysis of cryptocurrencies and tokens. Since these are not companies, there are no annual reports with robust metrics.
The value of a cryptocurrency like Bitcoin comes primarily from the trust of the community, comparable to traditional currencies like dollars or euros.
The value of a utility token is largely determined by its usage capabilities and number of users.
Because cryptocurrencies are a new asset class in its infancy, it is also difficult to compare them to existing projects, as these are themselves only a few years old and do not provide a robust comparison.
Despite the differences with securities and the aforementioned difficulties, it is still possible to gain an advantage over other investors through FA. If you put some diligence into a structured research and analysis of the results obtained from it, you can definitely count on a higher success rate of your investments.
How To: Altcoin Fundamental Analysis in Simple Steps
Now you might ask yourself ‘What is the best way to start such an analysis?’. To answer you this question you find here an example for a classical fundamental analysis of a crypto-asset in practice.
For that I will show you the steps for a quick FA, normal FA & big FA:
These simple step-by-step instructions will help you get started with fundamental analysis of crypto assets.
But, pay attention: In the end, a coherent FA does not mean that the project will actually be a success. It also doesn't mean that the price is 'guaranteed' to rise. It is one of several factors that should be considered when planning an investment.
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