You will often find situations where fundamental analysis plays out just as you would expect. Fundamental analysis looks at the fundamentals of an asset, or in other words, every aspect of an asset that contributes to its overall value. They recognize market trends and identify areas where they can reliably predict what is going to happen next. While markets arenot always predictable, with sound analysis, you can often get at least a reasonably good idea of what the most probable scenarios may be. As a crypto trader, you want to know what causes prices to rise, fall or stagnate.

They might do this for several businesses within a niche, for example, to figure out how their prospective investment stands in relation to others. See how Cointelegraph Markets Pro delivers market-moving data before this information becomes public knowledge. This one might be a little tough for someone who is just looking to invest in the underlying token of a project.

Crypto fundamental analysis can help investors see through misleading market values to learn what a currency is really worth. Taking the time to understand and analyse these metrics can give users confidence in an otherwise unpredictable market. With tools like hourly asset analysis and fundamental analysis techniques, investing in crypto doesn’t have to be a gamble. The NVT Ratio is similar to a P/E Ratio in the equities markets and is one of the core valuation metrics in crypto analysis. The MVRV Ratio is market value by realized value and is a similar yet more complex ratio to the NVT Ratio. Realized value tracks the trade price at which the last trade was executed.

Crypto fundamental value analysis

In 2019, crypto assets have become less correlated, usage in the network has increased and value is present which means an end of the crypto winter. That’s been validated with the price-action of bitcoin moving up strongly through several key levels of resistance and the strong performance in Q2. Armed with these, fundamental analysis should give the investor more data points from which to make an informed investment decision. The real value of a stock, also known as the intrinsic value, is the underlying worth of a company that is reflected in its stock price. It is based on the company’s financial performance, assets, liabilities, growth prospects, management team, industry conditions, and other relevant factors. The real value of a stock can be calculated using various methods such as discounted cash flow analysis, price-to-earnings ratio, price-to-book ratio, and other valuation metrics.

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. Stock-to-Flow ratio are growing in popularity amongst Bitcoin proponents.

Factors that can influence the overall costs of mining include the current price of the asset, the number of transactions processed, and fees being paid, to name a few. Of course, the direct costs of mining are also important considerations. Active addresses are the blockchain addresses that are active in a given period. Approaches to calculating this vary, but a popular method is to count both the sender and receivers of each transaction over set periods (e.g., days, weeks, or months). Some also examine the number of unique addresses cumulatively, meaning that they track the total over time. Crypto fundamental analysis involves taking a deep dive into the available information about a financial asset.

Market Value to Realized Value Ratio (MVRV)

But even with the more centralized cryptocurrencies, traditional FA indicators can’t tell us much. Your goal is to reach a conclusion on whether the asset is overvalued or undervalued. At that stage, you can use your insights to inform your trading positions. Cointelegraph covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.

Crypto fundamental value analysis

Bullish investment reports using fundamental analysis have been published by Goldman Sachs, JP Morgan and Morgan Stanley. And models built by on-chain analysts such as the Stock-to-Flow, have given bitcoin’s price a prediction of AU$1.9 million by 2025. Most crypto projects provide a white paper, which helps define the objectives and technical details of the cryptocurrency. While some white papers may contain technical jargon not understood by casual investors, it is important to read through the paper to learn about the vision of a project. Fundamental analysis is a method of analyzing the financial statements and historical data of a company or crypto asset to determine its intrinsic value .

A coin whose development has been constant may be more appealing than one whose repository hasn’t crypto fundamental value analysis been updated in two years. He later admitted to falsifying parts of the project’s white paper.


In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Ethereum price analysis is a complex process that requires a solid understanding of various techniques, including fundamental, technical, and sentiment analysis. Technical analysis employs historical price data and indicators to identify patterns, trends, and potential price movements. The creator or team behind a cryptocurrency is another helpful project metric.

Remember, a token’s price goes up only if there is interest and market action. The more people talk about and invest in a token, the more likely its price will appreciate. The people offering the project must have precisely the right skills to make their project work. The white paper should have information about each member of the team, but doing some independent research can be helpful too. Before investing, consider your investment objectives and’s fees and expenses.

  • The MVRV Ratio is market value by realized value and is a similar yet more complex ratio to the NVT Ratio.
  • An initial coin offering is an unregulated means by which funds are raised for a new cryptocurrency venture.
  • Additionally, studying the fees paid over periods provide further insight into the demand for transactions on a blockchain.
  • The network value to transactions ratio is used to determine if the market is growing in a healthy manner.
  • The developer or team’s record can reveal whether they’re trustworthy or have had success with similar technology in the past.

In summary, our analysts used technical trading tools to predict, that while we may see a short drop in price in the short term, the market would then most likely keep pushing higher. Crypto projects are also notorious for an uneven distribution of tokens, meaning that the token supply is low at launch and then increases substantially over time. This can cause a significant drop in price as the new tokens to flood the market.

Technical Analysis

Ask around these online communities to get a feel for the industry reputation of key leaders on the project, as well as the perception of that project. If there are lots of negative responses to questions about a key leadership member or the project as a whole, this could be a red flag. The road map may be available in the white paper, though most crypto project time lines are ever-changing and are listed on the company website. If there is no defined road map, or if the milestones are too generic, this is a red flag.

Crypto fundamental value analysis

Firstly, we can see it lacks many fundamental value propositions like a roadmap, developer team, and even a whitepaper. Cryptocurrencies are digital currencies that are not controlled or supported by any central authority like banks. Instead, transactions and ownership data are stored through distributed ledger technology, such as a blockchain. If there is a large community base that is well-organized and frequently promotes the project, this could be a sign of a growing cryptocurrency. If there is sparse engagement and no substantive discussion on any community platforms, this is a red flag. The white paper should clearly define the goals of the project, how their technology will achieve those goals, and how the cryptocurrency will function.

Most crypto projects have a roadmap in which they outline the timeline for updates, releases and new features. Fundamental analysts can use the roadmap to see if things are still on track, or if the project is experiencing delays. A whitepaper is what cryptocurrency projects publish when they start working on the project. It outlines the purpose of the project, and how it is intended to be operated.

Review the Price Data

As with all types of analysis, fundamental analysis isn’t perfect—it takes time and effort to gather accurate data on a given cryptocurrency. To get our MVRV indicator, we simply divide the market cap by the realized cap. If the market cap is much higher than the realized cap, we’ll end up with a relatively high ratio. A ratio over 3.7 suggests a sell-off may occur as traders take their profits due to the coin’s overvaluation.

By considering various internal and external factors, you can evaluate whether a cryptocurrency is overvalued or undervalued. The MVRV ratio then simply divides the real market cap by the realized value. The more the market cap exceeds the realized value, the more overvalued the token is assumed to be.

Is Investing in Crypto Safe?

For a cryptocurrency that uses a proof of stake system, transaction validators stake their holdings in the process of block validation. The amount staked at a given time could also indicate how much interest a crypto asset attracts. Before investing in any crypto, you must complete a fundamental analysis to gain a bigger picture of what is happening within a blockchain network. A cryptocurrency analysis involves examining all the available information about a digital asset.

As people lose the keys to their wallets and no more bitcoins are produced, we would see a negative ratio. We would see the stock-to-flow ratio flow go towards infinity and then become minus if we displayed this graphically. We calculate the indicator by taking the total circulating global supply and dividing it by the amount produced per year. In Bitcoin, you can do this with easily found circulation figures and data on newly mined coins. Decreasing returns from mining leads to a higher ratio reflecting its scarcity, making the asset more valuable. As Bitcoin goes through a reward halving event periodically, we can see this reflected in the flow of new coins into the market.