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Fundamental analysis of cryptocurrencies can help you evaluate coins and tokens before investing. You can do it with these tips.
1. That’s what fundamental analysis is all about
Fundamental analysis refers to evaluating an asset based on fundamental factors such as technology, team, market capitalization, supply and demand, and other relevant information. With cryptocurrencies, especially altcoins, it can be very useful because there is a large amount of cryptocurrencies. A successful fundamental analysis can reduce the risk of investing in Shitcoins.
2. Analyze the technology behind cryptocurrency
The technology used is an important factor when evaluating a cryptocurrency. Here you should deal with the consensus mechanism, scalability, security and speed of the transactions. Are they appropriate for the project in question and do they correspond to the use case? Then that’s a good sign.
3. Rate the team and developers
A strong team and experienced developers are crucial for the success of a cryptocurrency. It is important to research information about the team, assessing their background, experience and past performance. This can happen, for example, via social media channels. But beware: In the crypto space, great importance is attached to anonymity. Just because the development team may not be known does not mean that it is necessarily a shitcoin.
4. Keep market cap in mind when doing fundamental analysis
Market capitalization gives an indication of how much money is in circulation in a cryptocurrency. Compare it to other projects, the community and tokenomics to get an idea of whether the amount in circulation is reasonable or artificially inflated if necessary.
5. Examine the token offering and payout
The token offering and payout can impact the value of a cryptocurrency. For example, if there are a disproportionate number of coins, more and more of which are being dumped on the market, that can be a bad sign.
6. Acceptance and Use Considerations
The acceptance and use of a cryptocurrency play an important role in fundamental analysis. Are there companies and organizations or communities that use cryptocurrency? Then that’s a good sign. Does it look more as if the token or coin is only used in your own ecosystem? Then that is a less positive signal.
7. Consideration of partnerships and integrations
Partnerships and integrations with other companies or platforms can increase the value of a cryptocurrency. Attempts to analyze potential partnerships and assess their impact on growth potential.
The evaluation of a cryptocurrency community should not be underestimated for fundamental analysis. Attempts to assess community activity and social influence, including participation, social media engagement, and cryptocurrency support. Especially with followers on social media, it is important to check whether they are real people or just bots.
9. Assessment of the competitive landscape
Analysis of the competitive landscape makes it possible to evaluate a cryptocurrency in comparison to similar projects. In your fundamental analysis, look at the use case of a project and compare it with projects that have a similar use case: Which project has a better chance of being successful?
10. Consideration of Risks and Uncertainties
Potential risks and uncertainties should also be considered when conducting fundamental analysis. This may include regulatory risks, security concerns, technical challenges, or other risk factors.