Fundamental analysis looks at all financial information related to digital assets and the technology behind it to predict. Meanwhile, technical analysis that studies price trends by analyzing historical price movements for where prices will move. The results of these two methods of analysis should be complementary.
In this episode, we focus on fundamental analysis in the world of digital assets. So why is fundamental analysis on digital assets important? Isn’t technical analysis enough? Now the fact is, before buying digital assets, we need to evaluate carefully whether the digital assets have the opportunity to survive and grow.
You must keep in mind that the fundamental analysis of digital assets is different from the fundamental analysis of stocks. Because, most digital assets do not have income, income, profits and other traditional metrics, unlike stocks that have financial statements.
Then, where can you get reliable digital asset information?
First, you can open the digital assets website. Which usually describes the purpose and its links to the whitepaper and various other community channels.
The second is the whitepaper from the coin. This whitepaper is an official report that explores a project. Usually discuss the objectives of the project, internal work, timelines, and other aspects.
The third is community. All successful digital assets have at least some form of social media and channels such as telegram, slack or discord.
The last is press. Fortunately, there are now many journalists who blog about digital assets projects, both positive and negative. Now you as traders must be diligent in checking what they say on every digital asset project that you are interested in.
After knowing where you can get the information, we proceed to the steps to analyze the fundamentals of digital assets. Here are 6 steps for valuing a digital asset.
First is from market capitalization. Market capitalization is the value or price of a digital asset calculated from the total number of digital assets in circulation. Market capitalization is important because it shows how much room for growth. To calculate the market capitalization of a digital asset, all you have to do is multiply the current price of the digital asset by the number of digital assets that have been circulating. Or, you can directly visit coinmarketcap to immediately see the market capitalization of more than 2000 digital assets available! However, keep in mind that digital assets that have low prices can have the same market capitalization as digital assets that have high prices, if only they have a high amount of supply.
The second is the supply of a digital asset. For example, Bitcoin, throughout the world, the number of Bitcoin declared to reach 21 million bitcoin, and until this video was made, there have been around 18 million bitcoin that has been circulating in the world. You can also get this information on coinmarketcap, and you only have digital assets that you want to see. And all information is already listed on this page.
Now we go on to the third, namely trading volume, trading volume is an important indicator of the popularity of its digital assets. This shows the amount of currency digital assets exchanged over a certain period of time. Now this provides information on how many digital assets are sold or purchased for 24 hours.
For the fourth is the inventor and developer of the digital assets. Investigating the team behind a project is important. Traders usually watch interviews or conferences of their founders before investing money in a digital asset.
The fifth is potential roadblocks, which means something that can be blocked. For example, you have to know where the project is legally sitting. And also, ascertain whether there are competitors in these digital assets. Bitcoin has the advantage of being the first mover that makes it gain significant appeal.
The last is a roadmap on a digital asset. A good project roadmap explains what has been done and will be done. The more details provided, the better. A project will not go anywhere if it does not have a clear roadmap.
So far I have explained how to look for fundamental analysis information and also steps to do fundamental analysis correctly. I’m sure you all understand and can immediately practice it.