Feb 17, 2023
10 Steps for Sound Fundamental Crypto Analysis Revealed
Fundamental analysis is a process used to determine the intrinsic value of an asset. This allows traders to decide whether to invest in or trade an asset. The approach used to evaluate crypto assets is different since there is usually no history of earnings reports or profit and loss statements. To make an informed decision, research is needed to investigate the use cases, network, team, vesting schedules, and more. Here are 10 steps to help you evaluate the profit potential of any asset before investing or trading.
1. Read the White Paper
The white paper gives a detailed overview of a project, explaining the project’s goals, use cases, team’s vision, technology, plans for upgrades, and how the token provides value. However, it is important to be skeptical and ask hard questions to ensure the team is being honest.
2. Assess the Claims of the White Paper
It is important to ask questions and get complete answers before investing. Ask if the tokens are really distributed as promised, if they are meeting road map expectations, if they are inventing a problem just to solve it, and if there are any red flags.
3. Look at Competitors
It is important to identify competing projects and examine existing projects this new one might replace. Look to see if this project is better than the others or not.
4. Look at the Team Behind the Project
The people offering the project must have the right skills to make it work. Look at their credentials, experience, reputation, and involvement in any questionable projects or scams. If there is no team, look to the developer community and check the number of contributors and activity levels.
5. Look at On-Chain Metrics
On-chain metrics can be pulled from websites or APIs, such as transaction count, transaction value, active addresses, fees paid, hash rate, and staking.
6. Look at the Tokenomics
Invest in projects that create useful tokens, otherwise the token may not have utility in the marketplace. Determine how the market will embrace it and if it will provide profit opportunities.
7. Market Cap, Trading Volume, Liquidity
Look at the financial metrics of the token associated with a project, such as market capitalization, trading volume, and liquidity.
When a community is behind a project, it tends to help the token appreciate in value. Look at social media to gauge interest levels in the asset.
The team behind a project needs to actively market its token to stand out from the crowd. Look to see if they have a dedicated marketing team and if they are increasing market share.
10. Test the Core Product
If the core product is available, test it out to make sure it is functional, secured, and easy to use.
These 10 steps can help you make an informed decision before investing in or trading an asset. It is important to do your own research and consult your financial adviser before making any financial decisions. Cointelegraph Markets Pro provides market-moving data before it becomes public knowledge.Disclaimer: All investment or financial opinions expressed by MoonLanding Media are not recommendations and are intended for entertainment purposes only. Do your own research prior to making any kind of investment. This article has been generated based on trending topics, has not been fact checked and may contain incorrect information. Please verify all information before relying on it.