How to do fundamental analysis in #crypto?
This is probably one of the most popular question out there so just wanted to share some basic stuff that almost everyone in the crypto ecosystem can understand easily.
A thread🧵:
This is probably one of the most popular question out there so just wanted to share some basic stuff that almost everyone in the crypto ecosystem can understand easily.
A thread🧵:
1. Basic details:
To get the basic understanding of any project just go to websites like CoinMarketCap, CoinGecko for info including market cap, liquidity, volume, supply mechanism, description etc.
You can even use websites like Crunchbase to look at its investments & funding.
To get the basic understanding of any project just go to websites like CoinMarketCap, CoinGecko for info including market cap, liquidity, volume, supply mechanism, description etc.
You can even use websites like Crunchbase to look at its investments & funding.
2. Target market:
Every product has a target market and hence market size.
It's definitely good to have a larger target market but that's not always better as it could be really over-saturated.
Niche markets are small, but could be highly receptive to a new solution to a problem.
Every product has a target market and hence market size.
It's definitely good to have a larger target market but that's not always better as it could be really over-saturated.
Niche markets are small, but could be highly receptive to a new solution to a problem.
3. Project Metrics:
Go to the website and socials, if you find it legitimate then dive into the stuff including white paper, yellow paper...
This is essential to understand
- Statistics
- Use cases
- The supply and distribution scheme for coins or tokens.
- Road map.
Go to the website and socials, if you find it legitimate then dive into the stuff including white paper, yellow paper...
This is essential to understand
- Statistics
- Use cases
- The supply and distribution scheme for coins or tokens.
- Road map.
4. Use case:
You need to see if the token has utility and is actually solving a real problem; if it does then will the wider market recognise it.
Having some real world use case is essential to sustain in the long term especially during such extensive bear markets.
You need to see if the token has utility and is actually solving a real problem; if it does then will the wider market recognise it.
Having some real world use case is essential to sustain in the long term especially during such extensive bear markets.
The use cases could be anywhere between:
-Payments,
-Access to services,
-Cash backs and Discounts,
-Transaction fees,
-Governance,
-Staking etc.
If it's not solving a legitimate problem, it's not worth it.
-Payments,
-Access to services,
-Cash backs and Discounts,
-Transaction fees,
-Governance,
-Staking etc.
If it's not solving a legitimate problem, it's not worth it.
5. Volume and liquidity:
High volume and liquidity simply means high interest among people, lots of trading and hence, high demand.
High volume and liquidity simply means high interest among people, lots of trading and hence, high demand.
6. Roadmap:
This gives you idea about what the project is planning to do in the coming future, includes everything from upgrades, expectations to short-term and long-term goals.
This gives you idea about what the project is planning to do in the coming future, includes everything from upgrades, expectations to short-term and long-term goals.
7. Tokenomics:
This includes studying some elements including;
TOKEN SUPPLY: Make sure to know if the token is inflationary or deflationary.
Also understand how a token was launched, its circulating supply, total supply and max supply.
This includes studying some elements including;
TOKEN SUPPLY: Make sure to know if the token is inflationary or deflationary.
Also understand how a token was launched, its circulating supply, total supply and max supply.
8. TOKEN ALLOCATION:
Essential to know how are the tokens split up and what are each chunks for.
If a small number of insider people own a huge chunk of the token- it increases the risk of price manipulation.
(I personally won't touch it in such a scenario.)
Essential to know how are the tokens split up and what are each chunks for.
If a small number of insider people own a huge chunk of the token- it increases the risk of price manipulation.
(I personally won't touch it in such a scenario.)
9. TOKEN BURNS:
This is a deflationary mechanism done to permanently remove some tokens from circulation – to reduce the supply of coins in circulation.
According to the basic rule of demand and supply, reduction in supply implies an increase in the demand.
This is a deflationary mechanism done to permanently remove some tokens from circulation – to reduce the supply of coins in circulation.
According to the basic rule of demand and supply, reduction in supply implies an increase in the demand.
10. Some other metrics include studying;
Unlocked schedule, Yields, Mining and Staking details.
To get this information you can use platforms like CoinMarketCap, Etherscan, Messari etc.
Unlocked schedule, Yields, Mining and Staking details.
To get this information you can use platforms like CoinMarketCap, Etherscan, Messari etc.
11. Community:
One of the major aspects in crypto is the community.
In some cases, projects with poor tokenomics but a strong community can become successful like Dogecoin.
You can get to know more about this through social media especially Twitter, Discord and Telegram channels.
One of the major aspects in crypto is the community.
In some cases, projects with poor tokenomics but a strong community can become successful like Dogecoin.
You can get to know more about this through social media especially Twitter, Discord and Telegram channels.
12. Team:
Look for red flags in the founding team.
Research about their past projects, run background checks, and even analyse behaviour in the crypto space.
Ex- If you see Do Kwon's (LUNA) behaviour in certain videos or tweets you'll automatically see the kind of person he is.
Look for red flags in the founding team.
Research about their past projects, run background checks, and even analyse behaviour in the crypto space.
Ex- If you see Do Kwon's (LUNA) behaviour in certain videos or tweets you'll automatically see the kind of person he is.
Most people might not see its relevance but remember that the only true decentralised and trust-less thing we have in the entire space is BTC which means with most projects you're still trusting someone with your money. So, nothing's wrong with making sure there are no red flags.
13. Competition:
In any industry, look if the project:
-Has way too many competitors and
-Analyse if it's is better or worse than it's competitors or what benefits does it have over the other projects doing a similar thing.
If the product is unique, that could be a great sign.
In any industry, look if the project:
-Has way too many competitors and
-Analyse if it's is better or worse than it's competitors or what benefits does it have over the other projects doing a similar thing.
If the product is unique, that could be a great sign.
14. Partnerships:
Strategic partnerships have long been a vital element of any business's growth strategy.
And it's no different for crypto.
Strategic partnerships have long been a vital element of any business's growth strategy.
And it's no different for crypto.
15. Price history:
i) Check for longevity i.e if the project has been there since a long time because most cryptos come and go within just a few months/years.
i) Check for longevity i.e if the project has been there since a long time because most cryptos come and go within just a few months/years.
ii) Incase you're looking for relatively new projects to get larger returns then just assess the past months using technical analysis ALONG with the above mentioned points.
16. On-Chain Analysis:
Use platforms like Glassnode, lookintobitcoin to get details about:
- Transaction count and volume
- Exchange movements
- Miners behaviour
- Whale balances
- Long term vs short term holders etc.
Can help in analysing long-term market movements.
Use platforms like Glassnode, lookintobitcoin to get details about:
- Transaction count and volume
- Exchange movements
- Miners behaviour
- Whale balances
- Long term vs short term holders etc.
Can help in analysing long-term market movements.
Most alts will never recover after this bear market so it's crucial to carefully pick them and to only hold those which are viable and fundamentally strong.
These were a lot but if I've missed any important metrics, share them below:)
These were a lot but if I've missed any important metrics, share them below:)
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