A short guide on how to perform fundamental altcoin analysis has been published on TradingView.
Fundamental analysis It is an analytical approach that aims to establish the intrinsic value of an asset. In other words, it aims to determine whether the asset is overvalued or undervalued.
The fact is that the fundamental analysis of cryptocurrencies, although it has a somewhat similar approach to that used in legacy markets, cannot use many of the proven tools that are normally used.
Therefore, cryptocurrency networks cannot be evaluated using the same criteria as traditional companies. In contrast, the more decentralized cryptocurrencies, such as Bitcoin, can be analyzed in a more similar way to how commodities are analyzed, while for the more centralized, traditional indicators often do not say much.
In order to proceed with a certain degree of certainty, it would be necessary to identify some strong metrics, and this already excludes weak metrics such as the number of followers of the project on Twitter or Facebook, since it is easy to buy thousands. followers today.
The guide to fundamental analysis of altcoins
To go a little deeper, it is possible to analyze the so-called on-chain metrics, that is, those that can be detected by analyzing the transactions registered in public blockchains.
The guide recommends starting by looking at three metrics in particular:
- number of active addresses
- value of transactions
- value of tariffs (to get an idea of the real market demand).
He also recommends the use API-based solutions for analytics or the use of third-party tools, such as reports Binance research projects.
Other information that may be interesting is about the team behind a project.
For example, one could try to understand from the transaction analysis if team members are sending tokens to themselves or other team members, using new addresses each time to try to artificially inflate the number of on-chain transactions.
Or it could read the whitepaper and assess whether the intended use cases make sense or not. In fact, it is important to determine if the token has real utility and if it will have good mass adoption. The whitepaper should also highlight how many tokens the founders and team are holding, and how many will be available to investors.
Other useful data to analyze are those related to the past experiences of the team members, for example, if they have experience in the field or if they have raised enough funds to carry out the project. You can even go as far as looking at the company's records to see who the shareholders, directors, etc. are.
Another thing to consider is direct competition to a specific project. Another thing to keep in mind is direct competition to a specific project. In particular, check whether there are other projects offering similar solutions and whether, for example, they have already been further developed.
It would also be necessary to consider the mechanisms for offering tokens in the market, liquidity and trading volumes, as well as market capitalization.
Finally, the initial token distribution and tokenomics of the project should also be analyzed.
Unfortunately, it is impossible to determine a standard procedure to proceed with the fundamental analysis of a cryptocurrency, because each project is organized differently and releases different information. Also, the information disclosed by the team is not always correct.
The fact that the crypto markets as a whole remain very speculative makes it even more difficult to identify which deep metrics have a real impact on prices.
Therefore, on the one hand, it is quite difficult and complex to do a fundamental analysis of altcoins while, on the other hand, it is very difficult to obtain any certainty.