Cryptocurrencies have become incredibly popular in recent years, as they offer a unique form of digital asset ownership and an innovative way to conduct transactions. As with any investment, it is important to understand both the financial and technical aspects of the asset before making a purchase. This article will explain the basics of cryptocurrency fundamental analysis, which provides insight into the cryptocurrency’s underlying value and potential for success.
What is Cryptocurrency Fundamental Analysis?
Cryptocurrency fundamental analysis is the process of assessing a cryptocurrency’s underlying value based on its financial and technical characteristics. Fundamental analysis assesses a cryptocurrency’s market capitalization, liquidity/volume, supply mechanisms, number of transactions, cost of transactions, fees paid, hash rate and amount staked, whitepaper, competitors, team, and tokenomics.
Financial Metrics
Market Capitalization: Market capitalization is the total value of the cryptocurrency’s circulating supply. This gives an indication of the cryptocurrency’s overall market size and its potential for future growth.
Liquidity and Volume: Liquidity and volume are important indicators of the cryptocurrency’s trading activity. Liquidity is a measure of how quickly a cryptocurrency can be bought and sold without significantly affecting its price. Volume is a measure of the total amount of cryptocurrency being traded on exchanges in a given period.
Supply Mechanisms: Cryptocurrencies are created and released into circulation using a variety of supply mechanisms. These mechanisms, such as proof-of-work (PoW) and proof-of-stake (PoS), dictate how new coins are created and how transactions are processed.
On-Chain Metrics
Number of Transactions: The number of transactions is a measure of the amount of activity on the blockchain. It can be used to determine the overall health of the network and the level of adoption.
Cost of Transactions: The cost of transactions is a measure of the cost to send transactions on the blockchain. This is an important metric, as it can indicate the level of user adoption and the efficiency of the network.
Fees Paid: Fees paid is a measure of the total fees paid to miners to process transactions on the blockchain. This is an important metric, as it indicates the profitability of the network and the amount of incentives miners have to keep the network running.
Hash Rate and the Amount Staked: The hash rate is a measure of the amount of computing power being used to process transactions on the blockchain. This is an important metric, as it indicates the security of the network. The amount staked is a measure of the amount of coins held by users as an incentive to keep the network running.
Project Metrics
The Whitepaper: A cryptocurrency’s whitepaper provides a detailed overview of the project, including its goals and objectives, the team’s vision, and the technology behind the project.
Competitors: It is important to understand who a cryptocurrency’s competitors are in order to assess the project’s potential for success.
The Team: The team behind a cryptocurrency project is an important indicator of its potential for success. It is important to assess the team’s qualifications and track record of success.
Tokenomics: Tokenomics refers to the economics behind a cryptocurrency project. It is important to understand the project’s tokenomics in order to assess its potential for success.
Which cryptocurrencies gained in value in 2022?
Cryptocurrency markets experienced tremendous growth in 2022, with many digital assets increasing in value significantly. The following cryptocurrencies rose in price the most during the year:
Nest Protocol (NEST): +230%
Nest Protocol (NEST) experienced tremendous growth in 2022. The decentralized finance (DeFi) token surged 230%, becoming one of the top-performing digital assets of the year. NEST was released in 2021 and quickly gained popularity due to its low transaction fees and ability to earn interest on deposited funds.
Trust Wallet (TWT): +90%
Trust Wallet (TWT) saw great gains in 2022, with the price of the token increasing 90%. TWT is a multi-chain wallet and decentralized application (dApp) platform, allowing users to securely store, send, and receive digital assets. TWT is supported by a wide range of blockchains, including Ethereum, Binance Smart Chain, and Tron.
GMX (GMX): +90%
GMX (GMX) saw a similar increase in value during 2022, with the price of the token rising 90%. GMX is a blockchain-based platform for creating and trading derivatives, allowing users to make money from price changes in digital assets. The platform also allows users to hedge their positions and create custom trading pairs.
Shardus (ULT): +87%
Shardus (ULT) saw impressive gains in 2022, with the price of the token increasing 87%. ULT is a distributed ledger technology (DLT) platform that allows users to securely store, transfer, and trade digital assets. ULT is designed to be highly secure and scalable, with a focus on providing enterprise-level solutions.
PlatonCoin (PLTC): +61%
PlatonCoin (PLTC) also experienced solid gains in 2022, with the price of the token increasing 61%. PLTC is a blockchain-based platform that allows users to securely store, transfer, and trade digital assets. The platform also provides a range of enterprise-level solutions, such as smart contracts and decentralized applications (dApps).
SSV Network (SSV): +47%
SSV Network (SSV) saw strong growth in 2022, with the price of the token increasing 47%. SSV is a decentralized storage platform that allows users to securely store and transfer data. The platform is designed to be secure and scalable, providing enterprise-level storage solutions.
BinaryX (BNX): +13%
BinaryX (BNX) experienced modest gains in 2022, with the price of the token increasing 13%. BNX is a blockchain-based decentralized exchange (DEX) that allows users to securely trade digital assets. The platform also provides a range of trading tools, such as margin trading and limit orders.
Gains Network (GNS): +8%
Gains Network (GNS) also saw modest gains in 2022, with the price of the token increasing 8%. GNS is a decentralized finance (DeFi) platform that allows users to securely store and transfer digital assets. The platform also provides a range of DeFi services, such as yield farming and staking.
Conclusion
Cryptocurrency fundamental analysis provides insight into the underlying value of a cryptocurrency and its potential for success. By assessing the financial metrics, on-chain metrics, and project metrics, investors can make informed decisions when considering a cryptocurrency purchase.