What is fundamental analysis
Crypto for Beginners
Fundamental analysis studies cause. It is focused on the events, happening in the world, geopolitical situations, news regarding cryptocurrency specific token, etc. Gathering all these information about desired token will give a trader better prospect into if it is worth to buy crypto token or rather wait for better entry point.
Many elements must be considered when establishing the worth of an item, including the current and future macroeconomic circumstances of the region and country, industry development potential, profit and dividend forecasts, and the cash flow of the corporation behind the item. It's worth noting that the fundamental judgments are based on the authors' subjective assumptions, therefore the results can't be considered 100 percent reliable. Despite this, it is still the most effective analysis, and its judgments are frequently the only recommendations you have when other studies are unavailable. Let's take a look at the three most common measures that may be used to undertake a fundamental study on a cryptocurrency.
These types of measures are using more quantitative approach. These approaches are:
- Market capitalization, which determines what is the overall value of a given coin. More on this topic you can find here.
- Circulating supply is the total amount of tokens and coins, that are active and accessible to the public.
- Liquidity and trading volume tells a trader how easy and fast one can buy desired cryptocurrency.
Project measures are using qualitative approach, which, for example, are:
- Researching and studying of competitors of a desired token. (For example, if one is interested into buying Bitcoin, they will research also Ethereum, Cardano, etc.)
- It is highly recommended that before buying some coin you get through the project and goals of a company issuing it, as well as what is their recorded history.
- It is also good to study the team members, what were their previous projects and how experienced they are in all fields.
It is a measure taken to evaluate the project. It can be done with the help of:
- Number of active addresses on the public ledger in a certain period.
- What is its transaction value.
- From the past few months, when everything is focused more on PoS type of crypto, it is advisable to check, how crypto is created and what is their PoW, if.
Because properly made fundamental analysis can take a lot of time and expertise, traders usually rely on brokerage companies. However, it is also advised that one performs analysis also by himself.