When an investor enters the market has two options, short-term investor to long-term. Being a short-term investor is not difficult, being a long-term investor in a market as volatile as cryptocurrencies is risky. But, with the evaluation of the assets everything changes.
Fundamental analysis for ¿Cryptocurrencies?
The world changed, and the market also changed. The digital currency market is only a few years old, however, it is a market that came to stay.
Within the market of digital currencies at the time of investment we can face several problems, the first of all is that the market has more than 2000 currencies quoting, the second problem that we can find when investing in cryptocurrencies is if they really are worth the value we are paying for them.
Fundamental analysis after technical analysis remains one of the market methodologies most used by investors, especially long-term investors. The fundamental analysis was introduced by Benjamin Graham in 1934, one of Benjamin Graham’s most famous disciples is Warrent Buffet.
What is the purpose of fundamental analysis in cryptocurrencies?
In the stock market world, fundamental analysis serves to calculate the essential value of an action or a public title. In the market of digital currencies serves for the same use, to know if in the currency that we are investing this expensive or cheap.
Can fundamental analysis be done on all market currencies? DO NOT. Digital currencies that have a platform behind and are centralized may be evaluated by investors in cryptocurrencies, however, currencies that claim to be digital currency may not be evaluated under this technique.
How to analyze a blockchain platform? Or a company and its currency?
We have several ratios to evaluate a company, in the stock market you can take all of them but in the cryptocurrency market it is totally different for being different assets, therefore, your evaluation has to be measured under the indicators of
Profitability on own resources (ROE)
Mainly to make a good analysis on a cryptocurrency we will have to read the White paper of it. This will show us, among other things, the project, the platform and the form of financing. If it is a company that provides services, as in the case of Ripple labs and its XRP currency, we will look at the quarterly and annual balance sheet. Then we can apply the ratios to invest in them.