Feb 17, 2023

Uncover the 10 Steps to Crypto Fundamental Analysis for Profitable Investing

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Fundamental analysis is a process of evaluating an asset to determine its intrinsic value and whether it is overvalued or undervalued. In crypto-asset analysis, the process is somewhat different than that of traditional market assets, as there is usually no historical data available, such as earnings reports or profit and loss statements. To evaluate the value of a crypto asset, investors must conduct extensive research, including investigating the project’s 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 for sound fundamental analysis to help evaluate the profit potential of any asset before investing or trading:

1. Read the White Paper: A good white paper provides detailed information about the project’s goals, use cases and distribution, the team’s vision, the technology behind the token, plans for upgrades and new features, and how the token provides value to users.

2. Assess Claims of the White Paper: Be skeptical, as the people behind projects can bend or even break the truth. Ask hard questions and get complete answers before investing.

3. Look at Competitors: Scrutinize the use case the crypto asset is targeting and the problem it is trying to solve. Identify competing projects and examine existing projects this new one might replace, if successful.

4. Look at the Team Behind the Project: Investigate the team’s credentials, experience, reputation and involvement in any questionable projects or scams. If there is no team, look to the developer community and check the project’s public GitHub for the number of contributors and activity levels.

5. Look at On-Chain Metrics: Analyze data on the blockchain, such as transaction count, transaction value, active addresses, fees paid and hash rate.

6. Look at the Tokenomics: Invest in projects that create useful tokens. Determine how the market will embrace it, thereby making sense of the token’s price movements and allowing investors profit opportunities.

7. Market Cap, Trading Volume and Liquidity: Consider the network’s value represented by the hypothetical cost to buy every unit of the asset, as well as the amount of value that has been traded in a certain amount of time.

8. Community: If a community is behind a project, it tends to help the project’s token appreciate in value. Investigate social media activity to determine sentiment and interest levels.

9. Marketing: The team behind a project must actively market its token to differentiate itself from the competition. Determine if the team is increasing market share or not.

10. Test the Core Product: If the core product is available, test it out. Knowing how the platform works can help inform a potential investing decision.

By taking the time to conduct a thorough fundamental analysis of a crypto asset, investors can make more informed decisions and potentially maximize their profits. Cointelegraph Markets Pro provides market-moving data before it becomes public knowledge. As always, investors should consult their financial advisor before making any financial decisions.