What is Fundamental Analysis?

With over 25,000 cryptocurrencies currently available to trade, it can be overwhelming, to say the least. You might be familiar with some of these questions that run through your head:

• Is that coin a scam?
• What’s the difference between this coin and any other?

Proper research can provide clarity to these concerns.

Fundamental analysis is a form of research that attempts to find the intrinsic value of a cryptocurrency project. This can include a whole range of quantitative and qualitative factors, including community support, market adoption, tokenomics (such as circulating and max supply), the technology’s potential, project leadership and much, much more.

Investors can use this data to try and understand if a project is  overvalued, undervalued, or aptly priced.

It’s important to understand that assessing cryptocurrencies differs from assessing traditional companies or stocks. 

A huge reason for this is that traditional businesses are centralised, and therefore have different financial and long-term goals to a decentralised crypto project. While companies (and their investors) focus largely on profit, cryptocurrencies don’t typically have a singular entity making money from the project. Therefore, crypto investors are often more concerned with factors like adoption and community growth.

While conducting a fundamental analysis assessment is helpful in gaining insight into the value of an asset, it can get complicated. It is important to make a fact-based analysis. There are certain potential risks when conducting fundamental analysis, such as reading incorrectly published data, misinterpreting information or making false assumptions. 

We’ll soon explore tools and checklists to assist you in evaluating a coin’s value. Instead of succumbing to FOMO (fear of missing out), take pause to research.

Why does it matter?

Many people choose to skip the learning phase of investing and instead follow the crowd and hope for the best.

Crypto trends often spread rapidly. By the time you hear of an opportunity, it might be late or just a passing fad. So how do you catch opportunities early, before the masses get in?

Enter fundamental analysis.

The importance of having a process

Having a well-defined process for fundamental analysis is essential for crypto investments due to the unique characteristics and complexities of the market.

We offer a downloadable checklist that outlines some of the factors you can consider when performing fundamental analysis. Please note that this does not cover all aspects to be considered when performing a fundamental analysis.

Download our fundamental analysis checklist

If you successfully go through a fact-based process and are satisfied with your research results, then based on your  investment strategy, this could indicate a worthwhile cryptocurrency to invest in — or to at least keep on your radar.

Why does having a fundamental analysis process matter? It could help:

• Avoid impulsive trading.
• Identify opportunities early.
• Identify effective strategies.
• Boost confidence in decision-making.
• Detect red flags in the project.
• Build accountability.
• Reduce position-related stress.