When it comes to the crypto market, learning about analysis methods is indispensable. You will know which tokens to invest in, the best time to invest in, and how to balance your portfolio. When you search for the phrase learn crypto analysis, you will get results like Fundamental Analysis (FA), Technical Analysis (TA), and on-chain data analysis. So what is the holy grail for you to make a profit in this market? Let’s learn more about Coincu.
Fundamental analysis (FA) is the analysis of the essential elements of a project, from internal factors to external factors, to evaluate the impact of each factor on the value of the project. The goal of fundamental analysis is to determine whether the current value is overvalued or not, thereby making more sound investment decisions.
Fundamental analysis, as compared to technical analysis, is a more extensive approach. Instead of looking at historical statistics, fundamental analysts thoroughly investigate an asset’s intrinsic value. They do this by gathering all of a coin’s possible qualitative and quantitative factors.
Let’s say you see an innovative coin/project that has many real-world applications. If you feel the coin’s price is undervalued in comparison to its intrinsic value, you could invest in it and, in theory, make a profit. At the same time, if you see that an asset is overvalued, you could sell it to make a profit when the price decreases.
How to do a fundamental analysis of a project?
Fundamental analysis evaluates a project from the inside out, from the general to the details. From the general market to evaluate the project details and from the details of the project to evaluate the general market. The purpose is still to grasp the generality, make more comparisons, and have more perspectives. For example, we will have some basic questions like:
- What industry is the project in?
- Which ecosystem is the project in?
- Where is the project in the big picture?
- Is the project a piece of the puzzle that the market needs?
- What is the growth potential of the project?
- Is the project team experienced? Are there long-term investors?
By determining the above factors, we will know if the project is capable of development or not.
- No matter how good a project is, in an undeveloped ecosystem, it will be difficult for the project to go up.
- In contrast, an ordinary project in an evolving ecosystem will receive a lot of attention.
After having an overview, we will go into the details of the project. At this step, we can know when to invest in the project and whether the project can grow or not. Because the pieces in the project are essential, can it meet the needs of the market users to go far or just stop at the fundraising round to make a profit? There are several keywords when it comes to deep analysis of a project:
Tokenomics and Utility
Tokenomics is the economics of token supply and demand. Supply and demand drive the value and price of cryptocurrencies. The higher the demand relative to supply, the higher the price. Tokenomics theory also includes the incentive structure used to motivate behavior on a network. The utility of a token represents the role it can play. A token with more real-world use cases may attract more users and attention.
It is essential for investors to know the demand and supply factors of the crypto market for these reasons :
- According to Seth Klarman’s book, Margin of Safety, it gives an understanding of the short-term performance of the crypto market.
- Tokenomics helps to ascertain the future worth of an asset.
- It gives an insight into the profitability of one crypto asset over the other in future.
Nevertheless, investors should remember the following factors help to get hold of tokenomics:
- You should learn about digital currency usage and the direct connection between the services being built and the digital asset.
- Find out the total number of existing tokens, their future stock limit, and when they will be created.
- Do you know about the owner of the digital coins and whether coins are reserved to be released later to the coin developers?
A market cap takes into account the supply of crypto and derives the actual value based on that. Take into account the market cap to see the potential for growth. Projects with larger market caps most likely have smaller growth potential relative to lower cap ones.
Product Road Map
Most crypto products have a road map for the future, showing the timeline for test nets, releases, and newly planned features. The road map should offer a clear outline of future developments. Use the road map to measure the achievement of milestones.
Development and releases
Just like a roadmap looks into the future, you can look back and see how a project has performed over time in terms of development. If there is a healthy history of releases, that’s a good look.
Market competition weeds out winners from losers. Doing a thorough search for market competitors identifies the landscape in which each project must compete. Understanding the overall ecosystem is crucial to evaluating the potential of a project. Example: Working with Oracle, Chainlink is currently the token most trusted and used by dapps and users. Then will have more projects are also about Oracle. Still, the investment opportunity to make money from these tokens will not be high without anything outstanding or with a chainlink-like mechanism.
Successful products have great teams behind them. What can you find out about the team? Look at the senior management: who are they, where they are from, what’s their history? If there is a skilled team with a wealth of experience, that’s definitely a good sign.
In addition, another factors also need to be considered when doing fundamental analysis such as: Is the development: Backer, Community, Whitepaper.. strong or not .. Synthesize all the above factors, analyze and compare. , you will evaluate how far the project really goes.
The pros and cons of Fundamental Analysis
Pros: Fundamental analysis helps to make decisions, and evaluate the important elements of a project, and how those elements affect the token value. The analysis of fundamentals helps you to make better investment decisions in the long term and not be led by the news.
Cons: Fundamental analysis requires you have to handle a large amount of knowledge, about technology, economics, and finance from micro to macro. Also, other investment opportunities cannot be explained by fundamental analysis. Such as Ponzi, meme coins. So in addition to basic analysis, you need to equip yourself with much other knowledge.
Technical Analysis (TA)
Technical analysis is the study of market behavior using price charts to estimate future price direction. The concept that all elements that impact market price – fundamental knowledge, political events, natural catastrophes, and psychological considerations–are promptly discounted in market activity is the cornerstone of technical philosophy. To put it another way, the influence of these external events will immediately manifest itself in price movement, either up, down or sideway. Whereas FA, looks at many factors surrounding the price of an asset, TA focuses on looking at historical price action only. It is therefore used as a tool for examining price movements and trading volume, and many traders use this analysis to identify trends and favorable trading opportunities.
Technical analysis also encompasses learning to analyze the market structure; find trends, support and resistance levels and generally learn to ‘read’ the ebbs and flows of a market. Includes separate analysis methods (Japanese candlestick pattern, Fibonacci, Elliott wave, EMA,RSI …) or a combination of methods. Technical analysis can use different chart types with different time periods. Coincu also have channel about Technical Analysis (TA), you can check more at: CLICK HERE
For the technical analysis method, you need to know how the candlesticks and volume work so that you can predict the next trend of the market. In technical analysis, it is divided into schools such as: Price action, Indicator. There will be separate outstanding advantages in each type, if you know the combination, you will have a stable trading system. Some of the most common methods:
- Candlestick Charting
- Elliott Wave Theory
- Reversal and continues
- Cycle Theory
- Dow Theory
- Delta Phenomenon
- Trendline Charting
- Fibonacci Series
- Wyckoff Analysis
- Volume Spread Analysis
A reality situation is as follows: When you use fundamental analysis to know which tokens/projects are good, worth investing in. However, you cannot jump in to buy right away because the price is at the top, so it is time to combine technical analysis to choose a reasonable entry point.
The pros and cons of Technical Analysis
Pros: Technical analysis is a robust tool for timing purchases and sales but unlike fundamental analysis it is not much use for estimating the real value of a token. Uses price and volume data which is objective data. Tools to warning short-term and long-term trend changes, so that traders can update buying/selling in the right trend, predict future prices with the expectation of better predictability.
Cons: A technical analyst can apply too many indicators to their chart resulting in underlying price action being overlooked and too many differing signals from the competing indicators which could result in ‘analysis paralysis.
On-chain data analysis
On-chain data includes information of all transactions that have occurred on a given Blockchain network. Through this, this data will be transparent about transactions as well as what actions are being taken by market players, selling and taking profits or buying more to accumulate more coins.
- Transaction volumes
- Block details such as miner rewards
- Price correlations
- Exchange inflows and outflows
- And more
The data can be broadly classified into three distinct categories:
- Transaction data (e.g. sending and receiving address, transferred amount, remaining value for a certain address)
- Block data (e.g. timestamps, miner fees, rewards)
- Smart contract code (i.e. codified business logic on a Blockchain)
Anyone who has an action on the blockchain, that action verified by the nodes, which will also be updated to the total blockchain network. On-chain data analysis is fairly new and completely different from technical analysis. Through this analysis, we can look at the current situation and also in the past from which we can take appropriate actions in the present and in the future without the need for technical indicators. From there we can see that on-chain data is the most honest and clear data.
Everyone knows about the collapse on May 19 when BTC fell from $37,000 to $29,000. If we look at the on-chain data, 253,729 BTC has deposited on centralized exchanges. It shows a high probability that investors deposit BTC on the exchange to take profits. And them the price of BTC Is down.
Popular providers of on-chain data and analytics tools
Glassnode: Switzerland-based Glassnode is renowned in the Blockchain space for its ever-expanding range of innovative on-chain indicators. The company’s online platform is very easy to use thanks to a great user interface. Even with the free plan, one can access a broad set of data points. Glassnode also publishes in-depth reports about on-chain insights on a regular basis. Furthermore, users can learn about different on-chain analysis concepts and indicators in Glassnode’s free
Coin Metrics: The mission of Coin Metrics, founded in 2017, is to provide investors with in-depth market knowledge regarding all major cryptocurrencies. They offer four products:
- Network data (e.g. visualization tools, on-chain exchange flows, coin age metrics, transaction backgrounds)
- Market data covering the top 20 global exchanges
- Third-party data (e.g. Twitter sentiment feed) A formula builder, legacy and reference rate charts complement Coin Metrics’ product portfolio.
IntoTheBlock: Provides individual investors with the largest and most advanced offering of crypto asset indicators in the market.
- IntoTheBlock’s Blockchain indicators are categorized into four main groups:
- Ownership (provides insights based on ownership concentration)
- Financial (covers price information to provide insights into profitability / the monetary value of transactions)
- Network (user growth, transaction activity patterns, costs)
- Social (Telegram and Github metrics).
CryptoQuant: CryptoQuant is a Seoul-based Blockchain data solution provider that focuses on Bitcoin, Ethereum, and stablecoins. Its data, which is available via API or directly in Python, R and Excel, can be classified into four subsets:
- On-chain data
- Exchange data
- Miner data
- Network data
The pros and cons of On-chain data analysis
Pros: Charts can be drawn, news can be buy but On-chain data cannot be fake. On-chain data does not lie, so it will provide us with the most accurate and objective information that is happening in the market. Because Blockchain technology is built towards transparency in information, moreover this information is difficult to penetrate and change, so this can be considered the most reliable information source on the market.
Cons: On-chain data is a very powerful tool for you to make your investment decisions. However, this is a tool that requires users to have analytical knowledge and experience at a certain level to be able to use it effectively.
The history and development of the Crypto market is still very young, the market cap is also very small. So this will be both a challenge and an opportunity for all investors. Choosing an effective trading method is inevitable. If you can putting all the trading methods together and continuously backtest to create the trading system that works best for you. Coincu hopes that via this article you will have a basic concept of trading methods in the crypto market, thereby helping you in the investment process.
If you have any questions, comments, suggestions, or ideas about the project, please email [email protected].
DISCLAIMER: The Information on this website is provided as general market commentary, and does not constitute investment advice. We encourage you to do your own research before investing.