Analyzing cryptocurrencies before making an investment decision is an essential step for every investor. Random investing can lead to significant losses, especially with the volatility of the cryptocurrency market. However, since most cryptocurrencies in the market are relatively new, relying solely on technical analysis may not be sufficient, as this type of analysis relies heavily on historical data of price movement, which may be unavailable or inaccurate for new currencies.
Therefore, fundamental analysis emerges as a key tool to rely on to understand a currency. Fundamental analysis focuses on studying the economics of a currency and detailed information about it, which will help you make informed investment decisions.
In this article, we will explain how to analyze cryptocurrencies using the tools available within the Binance app.
Currency Economics
Each currency has its own economics, and the word "economics" refers to the information about the economic system of the currency.
You can find out this information for any coin on Binance by going to the trading pair page and selecting Info.
A list of terms will appear, I will explain the meaning of each one:
Rank: The currency's ranking in the market by market value.
Market Cap: The market value of a currency, calculated by multiplying the price of the currency by its number in the market.
Fully Diluted Market Cap: The liquid market cap, calculated by multiplying the price of a coin by the total number of coins in the project, regardless of whether they are not in the market.
Market Dominance: A measure of a currency's market dominance, calculated by dividing the market value of the currency by the total market value of the market.
Volume: The trading volume of a currency over a given period, usually 24 hours.
Volume/Market Cap: The result of dividing the trading volume by the market value of the project.
Circulating Supply: The total number of coins offered in the market.
Total Supply: The total number of coins for the project as a whole.
All Time High: The highest price the coin has reached.
All Time Low: The lowest price the currency has reached.
It is worth noting that on the same page you will find a paragraph under the title Introduction containing a summary of what the currency project is.
Currency Distributions
Knowing the currency distributions is very important, especially the distributions related to the project team, because they give you an indication of the possibility of a price decline due to the project team or investors selling the currency.
On the Token Unlock page you will find four important things:
Allocation: This is the distribution of the project’s total coins based on specific categories such as team, investors, treasury, and so on.
From this chart you can see the percentage of coins owned by each category. For example, if you find that the project team owns a large percentage of coins, this is not a good thing and means that the team can greatly influence the currency.
Unlock Progress: A chart that shows the percentage of the currency that has not yet entered the market.
Most cryptocurrencies do not release all coins at launch, but rather these coins are unblocked over a period of time to limit the impact on the price of the coin.
Unlock Schedule: This chart shows the distribution of coins until they are unlocked and the percentage of coins locked reaches 0%.
Unlock Events:
This list shows the upcoming coin flip events with date and the amount of coins that will enter the market.
By knowing future dates, you can anticipate these events because they often affect the performance of the currency. You can also study the impact of previous dates on the currency to predict the size of the future impact.
Trading data
Knowing the trading data is very important to study and analyze the currency situation in the market. Knowing the volume of transactions, currency flows will give you a great advantage.
From the currency pair's trading page, click Trading Data.
You will see three important sections:
Money Flow Analysis:
This chart shows the flow of buying trades for the coin. For example, we see that in the last 24 hours, 76.57 million SEI coins were bought, while 68.1 million SEI coins were sold, which justifies its price increase in the last 24 hours.
Analyzing the volume of trades, we see that this rise was due to medium to small trades, not from whale trades.
5 day currency flows:
This indicator helps you compare the flow of currency within the platform. Some people follow this indicator because a large flow of currency within the platform means a willingness to sell, while a large flow of currency outside the platform is considered a willingness to hold the currency.
Currency flows within 24 hours:
This chart is important to follow, because seeing high flows of the currency may mean a willingness to sell.
