Feb 17, 2023
Investors: Follow 10 Steps for Sound Crypto Fundamental Analysis
Fundamental analysis is a process of finding the intrinsic value of an asset, with the goal of determining whether it is overvalued or undervalued. This information can then be used to inform investment decisions.
In the world of cryptocurrency, the approach to fundamental analysis is somewhat different than that used to evaluate legacy market assets. This is because of the lack of historical data, such as earnings reports or profit and loss statements, for crypto assets.
To uncover the fundamental value of a crypto asset, investors must do their own research. This includes investigating the use cases, network, team, vesting schedules, and more. By looking at the right set of factors, traders can determine the fundamental value of an underlying project before investing.
Here are 10 steps to help investors in their fundamental analysis of a crypto asset:
1. Read the white paper
The white paper is the document that gives an intentional and detailed overview of a project. It should explain the project’s goals, use cases and distribution, team’s vision, technology, plans for upgrades and new features, and how the token provides value to users.
2. Assess the claims of the white paper
It’s important to ask hard questions and get complete answers before investing in a project. Are the tokens really distributed the way they promise? Are they meeting the road map expectations? Are they inventing a problem just to solve it? What are other people saying about it? Are there any red flags? Do the goals seem realistic?
3. Look at competitors
Scrutinizing a project’s white paper reveals the use case the crypto asset is targeting and the problem it is trying to solve. Investors should consider whether or not that use case is viable and wanted, and identify competing projects and examine existing projects this new one might replace, if successful.
4. Look at the team behind the project
The people offering the project must have the right skills to make their project work. The white paper should have information about each member of the team, but doing some independent research can be helpful too. Have they worked on other reputable, successful projects in the past? What are their credentials? Are they experienced? Are they reputable members of the crypto community and blockchain ecosystem? Have they been involved in any questionable projects or scams?
5. Look at on-chain metrics
On-chain metrics are available by looking at data on the blockchain. This includes transaction count, transaction value, active addresses, fees paid, hash rate, and staking.
6. Look at the tokenomics
Investors should invest in projects that create useful tokens. In addition, they need to determine how the market will embrace it, thereby making sense of the token’s price movements and allowing investors profit opportunities on an ongoing basis.
7. Market cap, trading volume, liquidity
Financial metrics of the token associated with a project should be considered, including market capitalization, trading volume, and liquidity.
8. Community
When a community is behind a project, it tends to help the project’s token appreciate in value. Social media can have a significant impact on a crypto asset’s price action. Is the community active and excited? Are there a lot of shilling accounts? Is sentiment good? Are there plenty of developers?
9. Marketing
The team behind a project needs to actively market its token in order to differentiate itself from the crowd. Is the core team marketing the product well? Do they have a dedicated marketing team? Are they increasing market share or not?
10. Test the core product
If the core product is available, investors should test it out to see if it is hard to use, time-consuming or otherwise creates more problems than it solves.
These 10 steps for sound fundamental analysis can help evaluate the profit potential of any asset before investing or trading.
NFTs, or Non-Fungible Tokens, have become an increasingly popular way to invest in crypto assets. NFTs are unique digital assets, like artwork, music, or collectibles, that are stored on the blockchain and can be bought, sold, and traded like any other crypto asset.
NFTs are often used for promotional purposes, and many businesses are now turning to NFT marketing agencies to help them promote their NFTs. NFT marketing agencies can provide services such as creating and managing Twitter campaigns, creating NFT landing pages, and helping businesses to sell their NFTs.
Web3 agencies are also becoming increasingly popular, as they provide services such as developing decentralized applications (dApps), creating smart contracts, and helping businesses to build their presence in the web3 space.
Ultimately, understanding the fundamentals of crypto assets is essential for any investor looking to make informed decisions. By following the 10 steps outlined above, investors can uncover the intrinsic value of an asset and determine whether it is overvalued or undervalued.
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.
