Crypto currency fundamental analysis checklist
How to find the coin that will make 10x in the nearest month or two? To answer this question a clever investor should make thorough fundamental analysis of the selected coins.
There’s nothing difficult about it. If you know what exactly to look out for, you can easily make the right choice. But first you need to identify, how exactly you want to make money?
Two ways to trade cryptocurrencies
There are 2 major approaches to making money on cryptocurrencies: short-term trading and long-term investing.
A trader is someone who makes money on daily price fluctuation. He keeps his funds on exchange platforms, constantly monitors graphics searching for trading signals (like those that we post in our telegram channel Satoshi Advice) and with necessary level of skills and luck can make up to +50% or who knows how big profits per day.
An investor is a different kind of a player. He’s not so obsessed with daily graphics. He makes thorough analysis of digital coins, finds those that have huge potential, buys and keeps them on his own wallets for several weeks or months to sell them later when they grow in price. This type of trading strategy doesn’t require so much time and efforts as day-trading does. However, the overall profits are lower in this case.
The service BestRate.org that stands behind our project works best for long-term investors. It allows you to easily find the best rate to convert cryptos while keeping them on your own wallets. The best thing about this service is that you don’t need to entrust your funds to the third-parties.
Fundamental analysis of crypto-assets
All right, so you’ve decided to change some of your bitcoins for an altcoin. Here are the characteristics you need to study before you rush to throw your money into this or that asset.
1. Technology
This is the first thing you need to look at. Study the whitepaper of the coin you’ve selected to find out what technology stands behind it and if it offers anything innovative. The coins that have huge growth potential are always based on some really cool technical innovations that help people solve significant issues.
2. Coin usage
Find out how much the coin is used for its initial purpose and how much for speculations. The bigger is the number of transactions, the better is cryptocurrency ranking. For example, the most popular coins have the following number of daily transactions (September 2017):
- Ripple — 700,000
- Bitcoin — 220,000
- Ethereum — 40,000
This information is not so easy to find, but it’s worth spending your time.
3. Mining
If the coin can’t be mined and is only emitted by its developers, then in theory it means that at any tie a huge amount of coins can be thrown out into the market and the price will drop dramatically.
You can find this info at coinmarketcap.com. The coins that can’t be mined have a “*” mark.
4. MVP (minimum viable product).
The coin should have a minimum viable product at hand. Check if the platform that the team wants to develop exists in any state, as its existence gives a very big advantage to the project.
5. Team and advisors
Check the expert status of the team members and advisors that they’ve invited to the project. What other projects have they taken part in? Were these projects successful?
6. Roadmap.
Every coin should publicly post its roadmap, either on the website or in the white paper. Check if the team follows its plans and the features they planned to add are implemented according to the schedule.
7. Price per coin in USD.
This indicator can be found on coinmarketcap.com. The lower is the price, the higher higher it may grow in the future. For example, it’s much more difficult for Ethereum ($850 per coin) to grow 20x than for TRON ($0.05 per coin).
Also, don’t forget that all altcoins are very much dependant on the current BTC price, so take this factor to your consideration, too.
8. Daily trading volume.
This information is available on coinmarketcap.com as well. The strength of the trend can be estimated if the volume grows together with the coin price. It shows that the price has very good chances to grow.
9. Social activity
The social platforms to check:
- Bitcointalk
- Facebook / Twitter
Check if the public is actively discussing the coin and if the developers are responsive enough.
Another index to check is the number of visits (similarweb.com). If it grows, it’s a good sign.
What’s the best time to make the purchase
If you want to find out when it’s the best time to join the market and purchase the coin at the lowest price, you should also make technical analysis.
There are 3 main indicators that can answer this question. We’ve already reviewed them in the article 3 most useful indicators for trading altcoins. So if you want to dig a little bit deeper into the details, you can study it as well.
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