Fundamental Analysis

You want to know, as a crypto trader, what causes prices to rise, fall or stagnate.

Although markets are not always straightforward, you can sometimes get at least a fairly good idea of what the most likely outcomes might be, with good analysis.

A good trader understands when to trade. They consider business dynamics and recognise markets where they can forecast what will happen next in a reliable manner.

But how are they doing that?

Here, there are two answers: fundamental analysis and technical analysis.

The study of past market action to forecast potential price action is technical analysis. Technical analysis is an essential part of trade, primarily focused on human psychology-a fascinating field.

Fundamental analysis looks at the fundamentals of an asset, or any element of an asset that contributes to its overall value, in other words.

Fundamental analysis

Cryptocurrency is by no means limited to fundamental analysis-it is embedded in other forms of trading.

The idea is simple: if you can understand that an asset has an intrinsic value that is out of proportion to its current market price, based on your research, you can trade and, potentially, make a profit.

You should look at finding ventures that you think have a good chance of succeeding. Then other investors should note when you invest and the team proves its capability, and the market action should be optimistic.

That's simple research. To assess their potential worth, you're studying your investments.

It works the other way, too. You can decide that the asset is highly overvalued if you study an asset that has a large market cap. That's good, and sometimes happens.

When assets drop in price, you can potentially trade to make a benefit. This is known as shorting.

Situations where fundamental research plays out exactly as you would imagine, you will also find.

You can benefit if you can understand a project's future potential, or know that the project is currently undervalued in the market.

Smaller specifics also come down to fundamental research. In 2017, rebranding a token and giving it a new name and logo was very trendy in cryptography. Normally, a price rise will accompany a rebranding.

This has, however, stopped having an impact over time.

Traders need to be able to understand how market participants are going to receive structural shifts like this. In certain ways, it doesn't matter how you feel about it, it matters how you feel about it in the market.

A major difference can be created by little changes. Often meditate on:

• What modifications are taking place?

• How is the market going to respond?

Of course, more than just markets responding to developments, fundamental analysis is about. It is important to realise the possible future value of properties.

How to do fundamental analysis in cryptography

Many cryptocurrency ventures are not like conventional businesses. As with conventional equity investments, you do not have mounds of data to sift through as you might.

It is highly speculative, as crypto is in its infancy.

When reviewing an investment, there are several things to look out for (click the links to move to a section or scroll down to read everything):

Target market

There is a target demand for each product and this means that you should understand the size of the market.

It is not always easier to have a bigger market. If the market is high, solutions could already be over-saturated, reducing the probability of acceptance.

There are small niche markets, but they may be very open to a new approach to a problem.

Competition

In any industry, competition is significant, and you can use it to gauge the effectiveness of a crypto project. Consider of the:

• How many are the competitors?

This makes it harder for your chosen project to gain recognition if there are lots of players.

• How are they relative to their rivals?

Stacking something against rivals will illustrate strengths and weaknesses and indicate whether, in the long run, they are likely to defeat their rivals.

Evaluate the level of rivalry and determine, compared to the others, whether a project is in good standing or not. That could be a great sign if the product is special.

Team

Effective products have fantastic teams behind them.

What's there to find out about the team?

Look at senior management: who are they, where are they from, what background do they have? That's certainly a positive sign if there is a professional team with a wealth of experience.

Roadmap

Crypto ventures also, in one way or another, have roadmaps. They show what plans there are to move the project forward in the future. Take a look to see what you think of these proposals.

How optimistic does the roadmap look? Ambition is healthy, but too much can happen.

Development and release

You can look back to see how a project has done over time in terms of growth, just like a roadmap looks into the future.

If there is a healthy release history, that's a good look.

Partnerships

Partnerships are necessary in crypto to allocate importance, but before passing judgment, make sure you understand the specifics of the partnership.

Demand, tokenomics and utility

Supply and demand are driven by price and value. In principle, the larger the demand, the greater the price.

Demand is handled by tokenomics as well as utility.

Look at tokenomics, which is basically based on the token economy. To establish adequate demand, the token should be useful within the ecosystem.

Assess if the utility is adequate to drive future demand, and take into account future utility plans in your decision.

Status

On a level playing field, Crypto ventures don't start. If you were to launch a cryptocurrency tomorrow, and one was also launched on the same day by Google, it will possibly gain more traction from Google.

How is the business that controls this project set up? That could add to value if it already has a lot of users who will now use the cryptocurrency in question.

Whitepaper

Whitepapers outline a project's nitty gritty. They are technical papers, but they are important. They will explain what you need to know about how it works, which can have a big effect on your investment choices.

Prior to investing, read whitepapers.

Community and reviews

Take a dive into the forum and read project feedback. See what various individuals have to say about it.

Real world use case

At the moment, a lot of people get caught up and don't stop to think: why?

While there might be great fundamentals for a project, ask yourself if it needs to use blockchain and have its own cryptocurrency. That is something to worry about if it doesn't. Long-term value, one way or another, may sway it.

Pre history and age

Cryptocurrencies are going and coming. If a project has been developed for a long time and has held value consistently compared to other cryptos, it can have longevity.

However, from smaller, comparatively unknown coins that break out and become mainstream, greater returns can be discovered.

Liquidity and volume

How often do the cryptocurrency is traded?

This could be a token that's high in demand if there is a lot of competition and lots of trading.

Market cap

A market cap takes the availability of a crypto into account and extracts on that basis the real value.

To see the potential for growth, take the market cap into consideration. Compared to lower caps, projects with higher market caps are more likely to have smaller growth potential.

Regulation

Matters of regulation. That could have detrimental effects on the price in the future if a project does not adhere to laws and regulations.

Keep these things in mind when you are looking at a future investment. This is not an exhaustive list, but to help you become a better crypto investor, it's a great way for you to start researching possible crypto investments.