Do you have any doubts about whether a currency asset’s value is overpriced or too high? You can use a method known as the crypto fundamental study to determine the value of trading or investing by looking at its usage instances, its community, and the people who run the project. It will allow you to determine whether the currency is priced too high or undervalued. This post will give you a comprehensive guide to analyzing cryptocurrency.
When you decide to invest in any cryptocurrency, be aware that assessing cryptocurrencies is different from the conventional way of evaluating financial assets like equity since there aren’t financial statements. Analytical analysis fundamentally of a stock involves using financial statements to assess the financial health of a business and its feasibility.
Analyzing Cryptocurrencies Using Fundamental Analysis
Fundamental analysis of cryptocurrency is typically used for long-term investments because it analyzes how the asset has performed over time. Knowing the basics is essential for investors to make the most informed financial decisions, particularly in the long run. Fundamental analysis daily can aid in developing the most effective strategies for investing by anticipating the future of cryptocurrencies and deciding if it’s an investment that is successful.
If an investor is using an analysis of fundamentals, they realize that when the value of a currency is below its intrinsic value, It is the right time to invest. In contrast, it is time to sell when the price of the coin is higher than its intrinsic value.
Fundamental analysis is based on quantitative fundamentals. These generally fall into three distinct categories.
* Financial Feasibility
* Project Potential
* Blockchain/Protocol Used
Quantitative fundamentals are built on numerical data, which is then tested to see if it will surpass the market performance in the long run. But, since there could be too many data points, it could be difficult to determine which is crucial and which isn’t.
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Financial metrics
Financial indicators contain information about the asset that is currently traded and liquidity, external variables, and market reactions.
Market Capitalisation
When considering a cryptocurrency, the first thing they examine is market capitalization. It’s the sum of the market value of cryptocurrency expressed in dollars showing how much room to grow there is. To determine the market capitalization of a cryptocurrency by multiplying the current price per coin by the current supply.
Liquidity and Volume
The ease at ease with which an asset can be bought or sold is often known as liquidity. A liquid market is very competitive and offers less spread between the bid and ask. However, the market that is not liquid makes it difficult to purchase and sell goods at a fair price. Trading volume is used to measure liquidity since it indicates how much money was traded at a particular time.
Supply Mechanisms
One of the metrics traders should focus on is supply mechanisms. Across all markets, prices increase when supplies are low and demand is high.
Most Bitcoin users, for instance, hope they will see the value increase when the supply is exhausted. The current supply is 18.888 M Bitcoins for sale; however, just 2.111M Bitcoins remain to be mined since the supply limit is 21 million. Since 900 BTC are mined daily, the supply of BTC will run out in six years. The cost of BTC could rise due to the rising demand, or vice versa if the supply grows.
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Metrics of the project
Project metrics are based upon a qualitative approach that looks at the performance of the team, the whitepaper, and the competitors. They examine how crypto works and the process that led to it, focusing on the development aspect.
The Whitepaper
The whitepaper is a document of technical nature that explains the concept of cryptocurrency in great detail. In conducting fundamental analysis, it is advisable to refer to this document in conjunction with the discussions of your project. Learn more about the objectives of the project and what others are flagging as warning signs.
The Team
While some developers of currencies such as Bitcoin’s Satoshi Nakamoto prefer to keep their identities private, Most cryptos guarantee that information about the team’s members is readily available. Find out if the team, or the individuals behind the project, have made public information available on their official website, social media pages, or platforms where they host their open source initiatives (developer group) to know more about the project. These platforms include Github, Bitbucket, GitLab, Google Cloud Source Repositories, Phabricator, and RhodeCode.
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Blockchain Metrics
These are metrics on the chain that refer to the blockchain’s activities and are backed by the network’s data. They can reveal information about an asset’s behavior and the processes and technology that enable them to occur. Since the manual process of extracting details from data requires time and energy, This is achieved via APIs (application programming interfaces) ( APIs) that are more efficient.
On-chain metrics can be hard to locate initially. However, large cryptocurrency exchanges have come up with reporting systems that offer relevant details, such as the number of transactions per day, the active user, and the value of transactions.
Investing in cryptocurrency with KuCoin
The cryptocurrency market has grown into a popular investment option in the past 5 years. Crypto Exchange such as KuCoin allows investors to make the process easy and enjoyable. According to KuCoin, the two “tech geeks” who had the vision to be “early blockchain adopters” founded the exchange in 2012. They created KuCoin’s software in a café in 2013 and succeeded in their plan to transform the platform into”the “Peoples’ Exchange.”
From its humble beginnings, KuCoin today has more than ten million customers and is well-known within the world of cryptocurrency. KuCoin has even its currency, called it’s called the KuCoin Token (KCS). KuCoin is engaged in “developing an ecosystem” around its KCS.
KuCoin’s greatest strength is the many coins that it can offer its clients. This includes the main coins such as BTC, ETH, BNB, USDC, XRP, SOL, LUNA, KCS, and many others. In total, there are more than 700 cryptos on the exchange.
Futures can be traded with KuCoin. KuCoin Derivatives is “the most trusted” and “transparent crypto derivatives platform” available. As a leading cryptocurrency derivative market, KuCoin Futures offers USDT/Coin-margined, perpetual, and delivery contracts with the best market depth.