What is fundamental analysis in digital currency?

Two bottles filled with colorless and clear liquids, just like water, are in front of you. Among these 2 bottles, water has been poured into one and poison has been poured into the other. There is nothing written on them and you are very thirsty! Either you have to try your luck or know fundamental analysis! In fact, when you understand What is fundamental analysis? You can tell healthy water from poison.

In all financial markets, whether traditional markets or emerging markets such as digital currencies, there are some general methods for analyzing the market situation and deciding whether to buy or sell, one of the most important of which is Fundamental analysis Or the same Fundamental analysis Is. In this article, the definition of fundamental analysis and its comparison with others Types of analysis we pay

What is fundamental analysis?

Fundamental Analysis Or fundamental analysis Market Evaluation science Micro and macroeconomic variables, Financial data and other variable items (eg Price) about one PropertyFor example Digital currencies, take stock And important papers, worthy documents is what makes it possible to have intrinsic value (Intrinsic Value) and its possibility in the future determined Fundamental analysis by Benjamin Graham It was founded and in that the analyst examined and analyzed the conditions of one Project or company from various aspects pays and News And events important follows it.

Analyzing all aspects and factors affecting a project or company so that the intrinsic value and Potentials He recognized it as the definition of fundamental analysis. For example, if the news of Amazon's acceptance of bitcoin is published and a person predicts that the price of bitcoin will increase and buys bitcoin through this analysis, he is actually using fundamental analysis to make a decision about buying bitcoin. has done.

What is intrinsic value?

in economics and finance, intrinsic value or intrinsic value The real value of a company, digital currency, stock or any type of asset is said. You should not forget that intrinsic value is different from the price of an asset. For example, a property may have a price of 10 million Tomans, but its intrinsic value will be much higher than this amount due to the construction of a highway next to it in the next two years.

Intrinsic value from absolute value formula The current price of the asset (Current Price) Minus Strike Price it will be counted (IV = |SK|). Intrinsic value is one of the most important things that is calculated in fundamental analysis and has a great impact on the analysis result. Do not forget that the calculation of intrinsic value may be different for each property.

What is digital currency fundamental analysis?

Fundamental analysis of digital currency a method up to down The analysis is to examine in depth all the information available from a project, Queen Or token Called. In the fundamental analysis of digital currencies, both qualitative indicators and quantitative economic indicators are examined in order to determine its intrinsic price or intrinsic value.

Fundamental analysis in digital currencies is sometimes easier than fundamental analysis in other assets; Because documents and information are more easily available to the analyst due to the online presence of this entire project. For example, you can easily follow a project's news, white paper, website and blockchain information. This is despite the fact that accessing such information for a share or a property will not be very easy.

Fundamental analysis approaches

In fundamental analysis, there are two main approaches:

• Top-down approach Which means that the analyst first evaluates all macroeconomic indicators and then goes down in layers. For example, after the macro indicators, it examines the industry indicators and finally puts a particular company under the microscope.
• Bottom up approach It is the opposite of the previous approach; In this case, first, instead of macro-to-micro analysis, micro-to-macro analysis is done. That is, first of all, the company, property or project is analyzed, and then larger issues such as the field under the microscope are analyzed.

Fundamental analysis indicators in digital currencies

Now that we understand What is fundamental analysis? And what approaches it includes, it's time to see what Factors we should check in our analysis and what are the most effective in this type of analysis. Note that in this article, the order of the indicators is not important and checking all the items will help you to analyze better.

Market value (Market Cap)

Market value or market cap The product of the number of available tokens is the price of each unit; That is, if the price is $40,000 and there are currently 19.5 million bitcoins in circulation, its market value will be $843 billion. Market value is considered a very important parameter in fundamental analysis.

The higher the market value of a currency, the lower the risk of investing in this asset. However, you should not forget that the market cap is an indicator and you cannot determine its intrinsic value by relying only on this part and go towards investing with your eyes closed.

Trade Volume

Turnover That is, MThe total value of tokens is traded during a specific interval (for example, daily).. The volume of transactions is directly related to demand has it. The higher the trading volume, the higher the demand. But the story is not that simple.

In a market like the crypto market, Volume manipulation It is not very difficult for new tokens; Therefore, despite the high importance of transaction volume in fundamental analysis, Should not He looked at it as an isolated factor.

The low volume of transactions creates this problem for you that if you buy that currency, since the volume of its daily purchases and sales is low, if you intend to sell it, you will face a problem to sell it. Liquidity problem they say.

News

No matter how important News There is little to say about a project or digital currency in fundamental analysis. Positive and negative news A project has a great impact on its price behavior in the short and medium term. For example, after every important news that favors Bitcoin, its price goes up and after the news of exchange hacking, the digital currency market also falls.

News is one of the most effective mechanisms in any market and therefore should not be neglected. Therefore, we suggest that you always take a look at the breaking news section of digital currencies to find out about the latest news in this field.

FCAS parameter

FCAS or Fundamental Crypto Asset Score Points of projects Fundamentally is determined by considering various parameters. This scoring is done in a relative and comparative manner between different projects. Scoring in the FCAS parameter is based on the scoring interval of 0-1000 and then this interval to five category Excellent, Good, medium, caution And shaky is divided

FCAS indicators are:

• User activity in social networks
• Performance of project programmers
• Code changes
• Involvement of the developer community

Read more: What is the Fundamental Index or FCAS?

Roadmap

Roadmap is a table, graphic or time chart that shows what dates a project is supposed to do. A roadmap is actually a business plan to reach a specific goal. Roadmaps are usually compiled and published every six to one years.

Projects that don't update their roadmaps, don't deliver on past commitments, or have long delays, and don't provide updates during these long delays, are not good investment options. .

Project development team

Project development team It is like a painter of a painting. The more skilled the painter, the higher the quality of his work is likely to be. When a strong team launches a project, the probability of its success increases unconsciously. One thing to keep in mind is that the development team is very important in blockchain projects, as many hacks occur due to poor programming code.

If a strong team is behind the development of a project, the probability of the project being good increases and you can buy and invest in it more safely.

Competitors

How many similar projects are there? In which areas are they stronger? Has the project you want to invest in overcome the problems of previous examples? These are the questions that at the time of investigation Competitors You must answer them.

In addition, More competitors It means more supply and if the demand is not as much as this supply, the probability of failure of a project or a class of projects will be higher. Therefore, always check the competitors of a project in fundamental analysis.

Tokenomics or Tokenomics

Another very important factor Tokonomics Or Token economy Is. Token economy means how to distribute, allocate and provide tokens on the network and to different addresses. Does the project you are considering have token burning? How are new tokens created? Is the number of tokens limited?

Questions like these will help you plug a lot of numerical data into your equations. For example, if no new token is going to enter the network, then its supply will be limited, although this is a positive indicator in terms of price, it affects the utility of the project token.

Technical infrastructure such as how to mine

By comparing the prices of digital currencies that Ability to extract (such as PoW-based proof-of-work currencies) with the amount of money required to mine them, another aspect of the potential growth potential of various projects can be explored.

If the cost for Extraction When a currency is used, it is not profitable compared to the price of that currency, miners will not be willing to mine that currency, and with the reduction of mining of digital currencies by miners, their price will enter a downward trend.

Application

Check Applications A project should be done very carefully because many projects offer different applications for their projects that are not valuable. The proposed applications will only have value if they are presented in response to a real need and are also innovative. For example, a token claims that it is going to eradicate poverty! You know this is not possible, so this application is rejected from the start.

In examining the applications of a project, we must ask ourselves, are the applications and solutions presented in response to a real need and problem? Or have its team members tried to provide a non-practical solution by presenting a false and fake problem?

Listing status on exchanges

Business Partners

Checking which currency you are interested in exchange offices Listed and traded, it is the task of a fundamental analysis. Before deciding on the status of a project, you should make sure that the currency you are considering is listed or is going to be listed on valid exchanges.

For example, a digital currency may be listed on major exchanges before its official release (but its trading has not started). Definitely, such a project has more credibility than other projects. Do not forget that all currencies are added in at least one exchange, but the credit of the exchange itself is also very important.

Project cooperation contracts With big and famous companies, it can have a very positive impact both in the short term and in the long term. The existence of cooperation with large companies gives a lot of credibility to the projects because it can guarantee the realization of the goals and plans drawn and the promises given by the team members. Therefore, in reviewing the projects, we definitely pay attention to the cooperation that the project had with other companies.

return on investment (ROI) parameter

Percentage of return on investment, which is abbreviated as ROI They say, the amount of profit from a digital currency is based on its price changes from the beginning of its launch (at the ICO price) (or its first trading price) to its current price.

To calculate the rate of return on investment, first calculate the difference between the initial price and the secondary price and finally divide it by the initial price. Finally, by multiplying it by 100, the rate of return on your investment is determined. Do not forget that this number will be negative if your property is losing money.

NVT parameter or network value relative to the amount of transactions

The ratio of the total value of the network to the volume of its transactions (the value of the network divided by the total value of transactions), a parameter called NVT makes This parameter can be obtained for any currency by dividing its network value (market cap or its total value) by its 24-hour transaction volume. The purpose of NVT calculation is to be able to see The ratio of the total value of the network to the activities of the participants What is it like in the network as an investor?

The analysis of this parameter is such that when the NVT parameter for a currency is high, it shows that Network Value which is equivalent to its market cap, it dominates the traded volume. This often happens when the price is bubbly and unstable. A low NVT parameter means a small difference between the market cap and the volume of daily transactions. When the volume of daily transactions is high compared to the market cap of a currency, it means that the activity of investors of that currency is very high and Can be considered as a bullish signal.

The difference between fundamental analysis and types of analysis

What does fundamental analysis have to do with technical analysis?

Fundamental analysis focuses on factors related to the foundation of a project or an asset and has a direct impact on its value. These factors include project goals, future development plans, team, toconomics, on-chain data, macroeconomics, etc. A fundamental analyst seeks to find the intrinsic value of a project or asset by examining these factors.

In contrast, technical analysis only focuses on past price patterns. Technical analysts believe that these patterns can be used to predict future prices. They seek to identify the next price movement by using various tools and techniques such as charts, moving averages, price patterns and indicators.

In general, we can say that fundamental analysis focuses on the fundamental factors of a project, but fundamental analysis on past price patterns. The purpose of fundamental analysis is to determine the intrinsic value of an asset, while the purpose of technical analysis is to predict future prices. It should also be noted that fundamental analysis is usually used for medium to long-term investments. While technical analysis for short and medium term investments.

What is the difference between fundamental analysis and sentimental analysis?

Sentiment analysis or sentiment analysis, as the name suggests, focuses on people's feelings and attitudes towards a project or asset. Some sources consider fundamental and sentiment analysis as two different approaches. But if we want to look at the matter in a little more detail, the experience and analysis of people's feelings and attitudes can be considered a part of the fundamental analysis of a project.

The reason is that you need to analyze factors such as social media, on-chain data, investors, news and macroeconomic events to analyze the sentiment of a project. These factors are part of the fundamental analysis of a project or property.

News and events released from a project reflect what is happening to the foundation of a project. In this way, we can consider sentiment analysis as a subset of fundamental analysis, where you need to examine the events and happenings of a project or asset that affect the attitude and feelings of traders.

The best sites and resources for fundamental analysis

Now that we understand what fundamental analysis is, we come to the best sites and resources to use in our analysis.

Lunar Crush

Lunarcrush (Lunarcrush.com) is an all-in-one tool in the digital currency market and fundamental analysis in this market. Using data such as user sentiments on social networks such as Twitter, LunarCrush provides a general analysis of user mindset.

Predicting trends and checking the activity of people who follow a certain project are among other features of Lunar Crush. The user interface of this tool is very simple. The weakness of this tool for Iranian users is the high price for the non-free version. It is worth noting that many features such as sentiment rating in social networks are free.

Crunch Base (CruchBase)

A very interesting tool in the world of startups and various projects is called Crunchbase (Crunchbase.com). In this tool, you can get very interesting overviews of a project. Just enter the name of the project or the company responsible for developing the digital currency you want and find all the information you need.

Viewing the news about a project, the status of investors and the trends of different markets are among the valuable features of this tool. Like Lunar Crush, Crunch Base has a free version and a premium version.

Investing

Investing.com is a tool designed to monitor the macro economy. The data on this website is up-to-date and you can monitor the news and articles about a stock in full.

Investing has a free version and a non-free version. To read certain analytical articles or use the indicators and tools of this website, you must purchase the premium version.

Glassnode

Glassnode (Glassnode.com) can be considered a comprehensive tool for fundamental analysis of digital currencies. Up-to-date and real-time data from the digital currency market, on-chain data and all kinds of charts for fundamental analysis are among Glassnode's capabilities.

Like other tools, you need to get a premium account to use Glassnod features. In the free version, only a limited set of features are possible, such as viewing simple charts and accessing anthologized articles.

CoinmarketCal (CoinmarketCal)

Coinmarketcal.com, as its name suggests, is a digital currency market calculator, in other words, a fundamental analysis calculator. The simple user interface allows you to find everything you are looking for very easily and quickly.

View the latest calendar of cryptocurrency events, airdrops, incentive programs, and several other features that you can find at CoinMarketKel. Accessing all the features of this website requires a premium account.

Chain Broker

On the Chainbroker.io website, you will find professional data such as investments in blockchain projects. Hot projects, hot platforms and different categories of digital currencies are among the features of China Broker.

Simpler charts such as Dominance of Digital Currencies, Latest Investment Plans and TVL are among the features you will find in China Broker.

Messari

On the Messari website (Messari.io) you can find any complex and rare analysis you want. Various types of charts are included in this website, which you can access in different versions.

You can get a 7-day free trial of this tool right now. Mesari is one of the relatively expensive tools in the market and you are required to pay $99 for each month of its use.

Dune Analytics

The most important possibility that Dune Analytics provides you is the possibility of data visualization using countless graphs. Users create dashboards on this platform and you can use them for your analysis.

This tool is very useful for those who are looking for such data. We recommend that you visit this website. Do not forget that DonAnalytics is somewhat advanced for users who do not have basic knowledge of fundamental analysis.

CoinGecko

Coin Gecko (Coingecko.com) is a website similar to Coin Market Cap. In this website, different digital currencies and projects are categorized according to their use and class. For example, you can choose the category you want to analyze from among the categories of NFTs, digital currencies, tokens on Ethereum, etc.

Various technical and fundamental charts are among the features of Coin Gekko. Note that CoinGecko provides basic information and is only suitable for viewing information such as the project team, their website, and such.

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