Glossary

Fundamental analysis is a method for determining a particular crypto asset’s intrinsic value, and assessing internal and external financial and economic factors affecting its future price.

You probably already know how unpredictable cryptocurrency markets can be. However, with proper analysis, you can get a good idea of what is likely to happen. One form of analysis you can use is fundamental analysis.

Fundamental analysis is an approach used by cryptocurrency investors to establish the intrinsic value of a crypto asset. Investors examine several internal and external factors to determine whether the asset is undervalued or overvalued. With this information, a trader can strategically enter or exit a position.

The concept of fundamental analysis is simple: if you can establish that a desired asset has intrinsic value that is not reflected in its current market price, you can use this knowledge to trade and make a profit.

When using fundamental analysis, your aim should be to identify projects that are likely to succeed. You then invest in such projects, and once the team delivers and proves its capabilities, other investors will notice, and favorable price action will follow.

Since fundamental analysis helps you research an investment to determine its future value, the opposite is also true.  If you find out that a crypto asset is highly overvalued, you can still profit through shorting.

Unlike in traditional companies, you usually don’t have a lot of data to sift through when evaluating crypto projects.  However, you can still analyze crypto investments by looking out for the following factors:

These are just a few of the factors you should consider when doing fundamental analysis for a crypto asset. Remember that the crypto industry is different from other traditional industries, so you might want to tweak your approach. As a long-term trader, fundamental analysis is a tool you must have in your trading arsenal.

Fundamental Analysis

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