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Many people think that cryptocurrency price movements depend solely on the volume of supply and demand in the market. Of course, this assumption is not true. Reason has to be the story behind the quantity of supply and demand.
In fact, today many crypto traders are trading this asset without watching the story. In fact, this is very important in creating a good long term crypto trading or investment.
The story behind this number will be analyzed in a fundamental analysis. cryptocurrencies Considering the fundamentals of encryption We will know which digital assets are good and which can survive long term and which are not. and then do a fundamental analysis of How do cryptocurrencies work? Check out the discussion below:
1. Factor analysis in the chain
The first fundamental analysis of cryptocurrencies is network factor analysis. Factors on the network are various factors. That could affect the supply and demand of cryptocurrencies. This can be obtained from the information in the cryptocurrency blockchain.
These data can be:
- The type of consensus used
- Transaction costs that investors must pay
- Number of assets entering the staking system
- Total outstanding assets
- amount and volume of transactions
- Number of active traders and more
This information is very important because it can affect the price of crypto assets. Information about the number and volume of active transactions and merchants. May affect the liquidity level of investment instruments. The more liquid the instrument The price of the tool is also quite difficult to change quickly.
Factual information on this network can be obtained through CoinMetrics, Glassnode, and other cryptographic sites. It has a subscription required to be able to access it.
2. Developed projects
Cryptocurrency proceeds are generally used by developers to develop things related to blockchain technology. Whether developing NFT games, DApps and DeFi or to develop Metaverse.
For profitable crypto investing and trading, traders and investors need to analyze the business side of the project. Starting from the advantages are who are the competitors and so on.
The logic is that if a game or tech project becomes and is sold on the market. The demand for related coins or tokens will increase. So the price will go up. Conversely, if the project is a scam or of poor quality. The demand for these assets will also decrease. same as price
3. Development team
The same is true for the issuer of stocks or bonds. You also need to pay attention to the quality of crypto asset developers. In other words, you definitely don’t want to invest in a company run by someone with no morals or a bad track record, right?
In the world of cryptocurrencies Not only the integrity of the developers is required. But it also requires the ability of developers to channel and manage investor funds to turn them into useful blockchain-related projects. Therefore, you need to determine who and how the crypto asset developer track record you want to build the tool. what is investment
4. Security level
Cryptocurrency Investment It’s a completely digital investment. Therefore, it is important for investors or traders of this commodity to pay attention to the security of this transaction. It starts with equipment quality and safety. crypto wallet Applies to the security quality of the blockchain system used in the tokens or coins themselves.
Usually, a token or crypto coin goes through a third-party verification process before it is officially launched (ICO) as investors and traders. You should never forget to read this verification document to make sure the assets are safe from hackers or fraud by developers.
5. Understand Tokenomics
Tokenomics, or Token Economy, is a method or mechanism used to distribute tokens. Included in tokenomics is the developer’s method for issuing new tokens or coins, and the token portion of the token is owned by an internal development company.
The ideal is that developers and other insiders do not have more tokens or coins than the number of publicly distributed tokens and coins. Also, during ICOs, the liquidity pool of assets is also locked.
The goal is that developers or other internal parties cannot trade these tokens arbitrarily. Thus, the liquidity and price of the tokens can be properly maintained.
6. Reserved Property
especially for stablecoin type cryptocurrencies, you should check the type, quality and quantity of assets to reserve (underlying assetBecause Stable coin’s goal is to create a crypto coin that fluctuates in price based on the change in the price of the reserved asset.
to make this happen The developer of this asset inevitably needs to reserve some of the assets in other ways. Be it cash, bonds, gold, etc., to maintain price stability, traders need to understand what might affect the price of the reserve asset.
7. Reading the white paper
If we know the word prospectus in stocks, bonds and mutual funds, in the world of digital currency we know. white paperThere is a lot of information in this document that you can use for analysis. cryptocurrencies related Since who is the developer? to what purpose to the technology used
White papers must be written in detail and organized in an orderly fashion. A haphazardly written white paper can be an early signal that a cryptocurrency project isn’t worth buying. Usually, it’s located on each coin’s profile page. So it is easily accessible for novice investors.
8. Community Quality
Unlike stocks or other investment tools, many cryptocurrencies are marketed through community systems. Therefore, the role of the community is very important as a platform for communication between developers and investors.
You can use this community to see if there are investors who buy these assets in large quantities. How is the quality of communication between investors and developers? and to discuss with other community members
In addition to the above 8 factors You can also look at the fundamentals of cryptocurrencies by seeing how the coin or token is sold in different markets. many or not crypto exchange Or not. The reason is that many crypto exchanges have limited coin capacity. Therefore, they only select the highest quality assets to sell. Not to mention that all crypto coins and tokens cannot be legally traded in Indonesia.
Cryptocurrency It is an investment tool that has only emerged in recent years. To make a profit, it would be nice if you invested in this asset not only by looking at it technically. But also look at the fundamentals of encryption.
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