How To Use Fundamental Analysis In Cryptocurrency Investment

How to use basic analysis in investing in cryptocurrency

As cryptocurrency popularity continues to grow, many investors are looking for ways to make reasonable decisions when investing in this digital property. One effective approach to fundamental analysis is the combination of qualitative and quantitative methods to determine unreasonable or incorrectly evaluated cryptocurrency.

What is the main analysis?

The main analysis includes a study of the main cryptocurrency economy, technology and market trends to understand its potential value and make reasonable investment decisions. Unlike a technical analysis, which focuses on short -term price changes, the main analysis examines long -term cryptocurrency perspectives.

Basic Basic Concept of Cryptocurrency Investment Analysis

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• Industrial Trends : Analyze industry trends, including adoption of new technologies, changes in consumer behavior and changes in market dynamics.

• Market mood : Watch the market moods through polls, social media and online forums to understand investors’ attitudes towards cryptocurrencies.

• Regulatory Environment : Evaluate the regulatory environment and updates related to cryptocurrencies such as government policy, laws and other legal acts.

• Competition : Compare a cryptocurrency value offer with competitors on the market.

Using a basic analysis to determine underestimated or inadequate cryptocurrency

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• Price -to -income ratio : Compare the current cost of cryptocurrency with the historical price to income ratio (PE ratio) to determine whether it is underestimated or overestimated.

• Dividend harvest : Analyze the crop of cryptocurrency dividend to evaluate the potential for long -term growth.

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• Risk of concentration : Evaluate the risk of concentration by comparing the capitalization of different cryptocurrency market and PE ratio.

Case analysis: Bitcoin vs Ethereum

For example, let’s take two popular cryptocurrencies: Bitcoin (BTC) and Ethereum (ETH) as an example:

* Market capitalization : BTC market capitalization is about $ 500 billion and ETH market capitalization is about $ 200 billion.

* Price -income ratio

: BTC trades approximately 80 prices to revenue compared to ETH 20.

* Dividend yields : BTC pays dividend yields about 0.5%and ETH does not pay any dividends.

Using these basic analysis tools and concepts, the investor can conclude that Ethereum is underestimated due to lower market capitalization, PE ratio and dividend yield compared to Bitcoin. Conversely, the higher capitalization of the Bitcoin market and the price -profit ratio can make it more attractive to investors for long -term growth.

The best practice applied to the main analysis of investing in cryptocurrency

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• Avoid emotional decision making : refrain from emotional decisions based on short -term price changes or speculation.

• Increase your portfolio : Increase your portfolio by investing in various cryptocurrencies to reduce the risk of concentration.

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