In this crypto fundamental analysis guide, we intend to offer you how to conduct a real investigation of a token or crypto asset.
There are many different aspects of fundamental analysis, and it might not be able to perform all, but you should at least understand the concepts.
The article identifies sources from which you should gather information and ways to analyze it.
What is Crypto Fundamental Analysis?
Crypto fundamental analysis is a way to compare the market value with the intrinsic value.
The intrinsic value is hard to evaluate when it comes to cryptocurrencies since all of them are considered startups. Therefore, no classic fundamentals are easy to access and analyze. Some classical fundamentals to study could be growth rate, earnings, user base, turnover, or similar numbers.
For startups, and cryptocurrencies and tokens in specific, you rather need to evaluate some things like
- White paper
- The founding team members
- Invest via launchpads
- Follow crypto influencers on Youtube
- Ask yourself – Does the application solve a problem for you?
Fundamental Analysis VS Technical Analysis
How to do Crypto Fundamental Analysis?
We have summarized some of the most critical aspects when performing a fundamental crypto analysis.
In crypto, public information is available due to public blockchain ledgers, white papers, social media, and much more sources.
Understanding the White paper
If you are about to make a severe fundamental analysis of any cryptocurrency, the first thing to do is deep dive into the white paper.
Here, you should find information about the tokenomics, the team, and any potential locked-up tokens release schedule.
Understanding the Tokenomics
Understanding tokenomics is vital for fundamental crypto analysis. If you can’t understand tokenomics, think twice about investing in the underlying token or cryptocurrency.
Once you have understood the tokenomics of a project, you should proceed and make a demand vs. supply calculation.
The supply with the release schedule should be announced in the white paper.
Some things to consider to evaluate the demand.
- Transaction count – A measure of how many transactions occur on the network and how popular it is. Preferrable, this is increasing over time.
- Transaction value – A measure of how many big investors are in the project. Preferrable, we would like to see institutions making large transactions here. The value should increase over time.
- Number of wallet addresses – A measure of how many people are using the network or the token
- Fees paid – Fees might be the income source for the project.
- The amount staked – If it’s a proof-of-stake cryptocurrency, it’s essential that a certain amount is staked to secure the network and reduce the supply.
- The number of developers – The network with the most developers should see the most updates and progress.
- Available money – How much money does the project have for developing activity, and when do they need to raise more capital or sell tokens on the market?
Investigating the Team members
Investigating the team members is almost a necessity. If you don’t find any information about the team, a big red lamp should be blinking in your head.
Further, you should Google the team members and make sure there are Linkedin pages about their history and experience.
For example, the FTX scam would have been possible to expose earlier if people understood that Sam Bankman Friedman was lending funds to Alameda research were his girlfriend, with minimal experience, was CEO. In addition, if investors had looked up the CTA, Daniel Friedberg, they might have found that he had previously scammed people through Ultimate Bet. Read more about the FTX collapse.
There are so many crypto projects, and you don’t need to take any chances here.
Find trustworthy Launchpads with a good track record
One easy way is to find some respectful launchpads with an excellent track record.
In such cases, the launchpads have done basic research about the projects to avoid scams and a bad reputation.
Some great launchpads are Trustswap, Binance launchpad, and Kucoin launchpad.
Follow crypto influencers on social media and Youtube
You should follow some of the great crypto influencers on Youtube to ensure what products they invest in and how they look at the market.
They must be up to date, have a brand they must protect, and not give misinformation.
Be careful with small Youtube channels since they tend to market questionable projects to earn fast money.
Also, be careful if the influencer is sponsored or not. Some of the best crypto influencers don’t even accept sponsorship, like Coin Bureau, but others take sponsors, and some might not even announce it, preferably.
Investigating the social media channels
Check how good the social media channels are from the team and the founders.
How often do they update, and how serious are they?
This is very hard to evaluate since there are examples when people are ridiculous but still successful (Elon Musk) and vice versa. Also, many followers are bots and possible to buy, so you can’t evaluate a profile only on such a number.
There are sites like Followeraudit where you can verify how many followers are real.
Ask yourself what problem the token or cryptocurrency solve for you
The best cryptocurrencies and tokens to invest in solving a specific problem for yourself.
Well, you can contribute to explaining to other people why the project solved a problem for you; it’s easier to evaluate if updates are good. It will be extra fun to contribute by commenting on social media or maybe even by governance voting.
Example: Let’s say you invest in a new blockchain game because you believe in the fundamentals. However, you cannot evaluate the gaming experience and updates if you are not a part of the project and playing the game yourself. Also, you can’t tell your friends what a great project you have invested in since you don’t know about the game experience.
Free Crypto Fundamental Analysis Sources
There are many outstanding free Bitcoin and crypto fundamental analysis sources out there.
At the end of the day, public data open for anyone is one of the essential fundamentals for the whole blockchain industry.
Here are some examples
- Glassnode – Onchain Data from Blockchains
- Altcoin Season Index – Bitcoin VS Altcoin Timing
- Coinmarketcal – Cryptocurrency Calendar
- CryptoQuant – Cryptocurrency Fund Flows
- Coindance – Onchain Data
- 3Commas – Backtesting a strategy
Read the full article about free Bitcoin and crypto fundamental analysis tools.