​​#Useful_notes
Fundamental analysis of cryptocurrencies: what is it?

Many crypto traders are used to rely on the indication and market signals, but this approach is effective only when forecasting for a short period of time. For a deeper and longer-term assessment, it is necessary to use fundamental analysis of cryptocurrencies. In this article we will talk about what it is and how to implement it.

FUNDAMENTAL ANALYSIS OF CRYPTOCURRENCY: DEFINITION

Fundamental analysis of cryptocurrencies is a method of predicting their value in the long term using all possible data – from economic to technical and social. This analysis cannot be used for short-term forecasts. Accordingly, this type of forecasting is more suitable for hodlers who are willing to wait months or even years until their investments return.

Fundamental analysis is based on a few key points that really characterize:

1. Any changes in the price of the asset are not spontaneous – they arise as a result of any events and reasons.
2. The causes of price movements can be tracked by analyzing all the data that relate to an asset.
3. If we take into account all the current facts and build them into a logical chain, it is possible with some degree of probability to predict the course for the future.

Actually, such principles are also relevant for crypto assets, but the approach to fundamental analysis is somewhat different, due to the lack of a centralized emission authority and a less stable mechanism of market behavior that is inherent in classical assets.

FUNDAMENTAL ANALYSIS OF CRYPTOCURRENCY: FEATURES

Fundamental analysis of fiat money is usually based on such criteria as evaluation of the level of inflation, the solvency of the issuing country, etc. But due to the characteristics of cryptocurrencies, such criteria are not applicable. Accordingly, traders had to develop their own evaluation factors. What data is the fundamental analysis of cryptocurrencies based on?

1. Being in demand. This criterion allows us to estimate how much cryptocurrency will be interesting to users in the future. If even now it has not aroused much interest, it is less likely to happen in the future. However, it is worth considering external factors, because some cryptocurrencies may be irrelevant at the moment due to the fact that they play ahead of the curve. For example, platforms that are connected with quantum computers today will be in great demand in the future, but they are not so relevant today.
2. Position on the cryptocurrency market. A coin with a capitalization of 1 billion has more prospects than a coin with a capitalization of 100 thousand. This indicator can directly speak about how widespread the cryptocurrency is. In addition, professional traders take into account both ordinary users and long-term investors.
3. Position in the traditional market. In this case, the attitude of the authorities to the cryptocurrency is evaluated, as well as its spread in the classical fields of activity.
4. Analysis of the status and activity of developers. How big-name developers are can also have an impact on the long-term prospects of the project. It is obvious that the platform of Pavel Durov has more chances of life than a start of noname. In addition, it is necessary to take into account the activity of the developers themselves – it demonstrates how effectively the cryptocurrency is modernized as it grows.

Of course, these are not all factors that are taken into account by traders conducting fundamental analysis of cryptocurrencies. In any case, the main task of the analyst is to collect the maximum amount of information on the asset. Accordingly, there are no restrictions.