In order to understand how you can use fundamental analysis to improve your trading and investing it is first important to understand exactly what the term fundamental analysis (FA) actually involves.

“Fundamental analysis is a method of evaluating a security in an attempt to measure its intrinsic value, by examining related economic, financial and other qualitative and quantitative factors”. — Investopedia

Fundamental analysts study anything that can affect the security’s value, including macroeconomic factors such as the overall economy and industry conditions, and microeconomic factors such as financial conditions and company management.

If you take a moment to think about this, you will see that the fundamentals analysis of private cryptocurrency projects might be a little more difficult than first thought. The lack of publicly available data, accurate financial data and in general any substantial valid information means that cryptocurrencies cannot be treated in the same light as traditional securities.

READ OUR COMPLETE GUIDE TO FUNDAMENTAL ANALYSIS IN CRYPTOCURRENCY MARKETS — HERE

Breaking Down ‘Fundamental Analysis’

The main purpose of Fundamental Analysis is to determine the health and performance of an underlying company by combining key numbers, data and economic indicators. In the case of cryptocurrencies available data would be; social reach, social popularity, analysis of the management team, past performance of that team, tokenomics, pre-sale/ ICO prices and amounts raised, upcoming news/ releases, partnerships and current token prices.

Doing this will help you identify fundamentally strong companies and projects. Investors invest in sound fundamentals, speculators invest without understanding the key underlying forces of a business.

The Basics of Fundamental Analysis

Fundamental analysis takes into account all available public data to determine the underlying value. Although the majority of investors use fundamental analysis to value both stocks and cryptocurrencies this form of valuation alone can be difficult to pull of in just the cryptocurrency market.

We recommend reading our article: 6 Steps To Evaluating Your Cryptocurrency Investments for a more holistic framework to analyse the true value of cryptocurrency projects.

############################################

This article was written by CoinLoop the market leading cryptocurrency information platform. Check it out here.

############################################