What is a Cryptocurrency Fundamental Analysis?

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Cryptocurrency can be bought, sold, and traded in a lot of different ways. However, finding the right strategies for your own cryptocurrency use can be complicated at first, especially if you are not used to handling cryptocurrency trading on a larger scale.

One of the most common tools is a Crypto Fundamental Analysis, a specific approach that investors use to combine all accessible information on a particular asset – in this case, a certain cryptocurrency.

What does Fundamental Analysis mean?

Investing in cryptocurrency can be complex, and there can be a wide range of information available on specific trades, currencies, or other factors. Understanding this information is often the first step towards making successful trades, but before you can understand it, you need to gather it.

A fundamental analysis is focused on ‘intrinsic value,’ the total, real-world value of a certain asset. This often involves gathering enough information to estimate this value based on things like market price, historical data, total supply and demand, or any future planned changes to how that asset might be used.

Unlike a technical analysis, though, a fundamental analysis is not really meant to predict market movements or follow trends. Instead, it might be more related to looking at the number of competing currencies, the total market cap, or how well-known the currency is.

Why should I use a fundamental analysis?

A fundamental analysis can offer some good insight into a certain cryptocurrency, making it much easier to judge potentially profitable trades. However, it is not the superior option – combining a good fundamental analysis with a good technical analysis is much more effective.

Performing a fundamental analysis often means looking at three distinct things:

  • Metrics related to public blockchain data, usually ones that show how much activity that currency has seen recently
  • Project-based metrics that look at use cases, documentation, and even related team members or companies
  • Financial details that cover more conventional information, like supply and demand or the total trading volume

All three of these are vital to figuring out how much a certain currency might be worth, but not all of them will be viable points of data to look through depending on the age and popularity of the currency. In this situation, gathering any information can help a lot, especially if you are new to crypto trading.

On-Chain Metrics

Fundamental analysis often thrives on on-chain information, anything that you can get publicly from the blockchain. This could be simple information like transaction counts and values or how many active addresses are involved.

Project Metrics

Project metrics are more related to the technology involved, the future roadmap of the current or blockchain, or even the people behind the project. Whether or not the technology is open-course can also matter.

Financial Metrics

Finally, there are the financial details to consider, like the market cap, supply, or even the current coin price. This forms the basis of figuring out how much the coins are worth in total, as well as the future changes that the currency might see in the short term

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