Hey there, cryptopm fam🌟
Ready to dive into the world of digital assets but feeling a bit overwhelmed? Don't worry, you're in the right place. Let's break down the essentials of cryptocurrency fundamental analysis so you can make smart, informed decisions. Whether you're new to the game or looking to sharpen your skills, this guide is here to help!
The Ever-Changing Crypto Landscape 🌐
The crypto market is a wild ride—one minute, a coin's value is soaring, and the next, it's plummeting. With over 25,000 digital assets and a market cap that once hit $3 trillion, it's clear that cryptocurrency is here to stay. And guess what? It's not just for the tech-savvy; younger folks are diving in too, with most traders under 40!
But how do you navigate this volatile market? By mastering both fundamental and technical analysis. This guide focuses on the former, giving you the tools to evaluate the true potential of various cryptocurrencies.
What Is Trading? 📈
Trading is all about buying and selling assets. In the financial markets, these assets can be stocks, bonds, currencies, and yes, cryptocurrencies. To trade effectively, you need a good grasp of fundamental, technical, and sentiment analysis. Let’s start with the basics of fundamental analysis (FA).
Fundamental Analysis (FA): The Basics 🧐
Fundamental analysis helps investors determine the intrinsic value of an asset. By evaluating factors like financial statements, industry trends, and market conditions, you can gauge whether an asset is overvalued or undervalued. This approach debuted with the 1934 book "Security Analysis," which argued that investors should consider all fundamentals before investing.
In the traditional stock market, FA uses metrics like Earnings Per Share (EPS) and the price-to-book ratio. But what about crypto?
Crypto Fundamental Analysis 🔍
Crypto FA is a bit different. It includes three main metrics:
On-Chain Metrics: These involve data extracted from a blockchain’s public ledger, like hash rate, active addresses, and transaction values.
Project Metrics: This involves analyzing a crypto project’s whitepaper, team, competitors, and roadmap.
Financial Metrics: These include market capitalization, liquidity, trading volume, and circulating supply.
On-Chain Metrics 🌐
On-chain analysis involves looking at blockchain data to assess the economic activity within a network. For instance, Bitcoin's hash rate measures the total computational power used to process transactions, indicating network security and miner interest. Active addresses show how many unique addresses are involved in transactions, while transaction values and fees reflect the currency’s circulation.
Project Metrics 📊
Project metrics take a qualitative approach. You’ll want to scrutinize the project's team, their experience, and the whitepaper detailing the project’s purpose and technology. Analyze competitors to see how your chosen project stacks up, and examine the roadmap for future developments.
Financial Metrics 💰
In crypto, market capitalization (total value of all mined coins) is a key metric. Liquidity indicates how easily an asset can be converted to cash, and trading volume shows how often a currency changes hands. The circulating supply gives you an idea of how many coins are in the market, influencing price stability.
Free Fundamental Analysis Crypto Tools
Several free tools are available to assist in conducting quality fundamental analysis.
It’s important to mention that top crypto analysis platforms such as Messari, Glassnode, Dune, Nansen, IntoTheBlock, and CryptoQuant offer comprehensive tools. However, this article focuses elsewhere, as their most advanced analytics are primarily behind a paywall. Yet, it’s worth checking out their free indicators, which can be quite helpful.
1. CoinMarketCap
CoinMarketCap is the go-to platform to check the current price of all crypto assets, plus some basic but valuable indicators, such as market capitalization, trading volume, and circulating supply, among others.
By default, the platform ranks cryptocurrencies by market cap, listing the price of each crypto coin and its main indicators on the home page.
By clicking on each coin, you can access a more detailed analysis. This includes:
Price chart across various timeframes
Market cap dynamics
List of exchanges where the coin is traded.
You’ll also find the latest relevant news, a brief overview of the crypto project, along with several analytical tools such as the number of addresses, the share of whales (large investors), transaction fees, and others. Additionally, there are links to the project’s official website, social media pages, and whitepaper.
2. Token Terminal
Token Terminal is a blockchain data platform that offers key metrics across major chains, including Bitcoin, Ethereum, Avalanche, Solana, Cardano, and others.
There is a search bar at the top of the terminal page where you can type any blockchain or crypto project you’re interested in. This will lead you to a dedicated page that includes a short description of the project on the right side and a list of key metrics, including the price, market cap, trading volume, total value locked (TVL), active users, fees, revenue, and more.
What I like about Token Terminal is that you can access multiple charts by scrolling down on a project’s page. The charts can display all the key on-chain metrics, which can be switched on and off on the right side.
Token Terminal has many interesting tools available only for pro users, but you can do some great analysis without any subscription as well.
A great tool is the financial statements of multiple projects, which shows the dynamics of fees, revenue, token prices, and more.
3. DappRadar
DappRadar is the best analytics tool for decentralized applications (dapps), which are built on blockchains offering the smart contract feature. The platform ranks all dapps and provides many great tools for different categories, including decentralized finance (DeFi), non-fungible tokens (NFTs), games, chains, and tokens.
As with Token Terminal, there is a search bar at the top to look for any dapp or token you’re interested in. Every dapp profile displays basic info and key metrics, including TVL, market cap, token price, pools, etc.
DappRadar is especially popular for its rankings, such as the top smart contract blockchains, top DeFi protocols, top NFT collections, and top NFT marketplaces, among others.
4. TradingView
TradingView is a charting platform used by over 50 million traders and investors to monitor price movements and financial metrics. It was originally created for traditional instruments, including stocks, commodities, and foreign exchange pairs. Today, it supports hundreds of cryptocurrencies as well.
As a charting platform, TradingView is mostly used for technical analysis, as you can detect special patterns on the candlestick charts, add all types of indicators, and test trading strategies.
However, you can still use it as a fundamental analysis tool by analyzing multiple crypto metrics on its charts. There is a little secret you should know about – with TradingView, you can visualize metrics that are available only for subscribed members on other sources. For example, you can see a lot of metrics from IntoTheBlock, like active addresses, which are actually for paid subscribers on their platform. Here is an example of AAVE:
We can also compare the evolution of the number of investors and the number of whales on TradingView:
5. DefiLlama
DeFiLlama is the go-to analysis platform for DeFi investors. It displays all DeFi protocols, chains, categories, and liquidity pools. It lists data on thousands of different coins and tokens.
Previously, DeFi Pulse was the main platform to monitor the DeFi space, but the resource shut down a few years ago, with DefiLlama replacing it as the leading DeFi analytics platform.
DeFiLlama lists over 3,000 DeFi projects, providing key metrics and stats for each protocol.
DeFiLlama also displays the main DeFi categories, oracles, liquidity pools, and blockchains. It is the most comprehensive DeFi analysis tool at the moment, and it’s free to use.
Conclusion 🌟
Understanding these fundamental analysis metrics can give you a solid foundation for making informed crypto investments. Combine this with technical analysis to get a complete picture of the market and make smart trading decisions. Happy trading, and may your crypto journey be profitable and exciting! 🚀
THAT'S ALL FOR TODAY... HOPE YOU FOUND THIS HELPFUL
#BlockchainAnalysis #FundamentalAnalysis #TokenMatrics #cryptopm #FA