Fundamental Analysis (FA) – what is it in cryptocurrencies?

In the classical world of stocks, fundamental analysis refers to a set of methods that investors use to determine the "intrinsic value" of a company, which may differ from its "external value" determined by the market.

The goal of fundamental analysis is to identify companies whose intrinsic value is higher than their external value, meaning they are undervalued by the market, and to profit from the market's eventual adjustment to the company's indicators.

However, fundamental analysis can also be applied to cryptocurrencies, but there are important nuances to consider for successful application. The indicators used to assess intrinsic value will be different, and some may be easier to gather and interpret, while others may be more challenging. There are many online metrics provided by blockchains, such as transaction counters, active addresses, hash difficulty, and others, which can provide insights into the state and prospects of a cryptocurrency.

Fundamental analysis in cryptocurrencies allows for an assessment of how effectively a team is working on a project. It is important to learn about the team leaders and their previous projects, review the whitepaper and roadmap. This requires skills, but it allows for an evaluation of the technology underlying the cryptocurrency, the realism of the set goals, and provides a glimpse into its future state in one or two years, albeit with decreasing forecast accuracy.

While fundamental analysis for cryptocurrencies is based on the same methods used in traditional markets, it requires different skills and knowledge. Mastering it may not be easy, but it can be a valuable key to generating profits, as it demonstrates greater effectiveness than technical analysis when applied to longer time periods.