Fundamental analysis is the use and study of a vast collection of data, whether on economic, financial or technological aspects. It used to try to forecast the price changes of cryptocurrencies and to understand how some factors affect our investing strategies. It provides insight on how a price reacts to the economic environment.
The fundamental analysis appears in many forms. It may be a released whitepaper which talks about the technology behind a project you wish to research. It may also be an event where the American government wants to regulate the cryptocurrency market. Even the speculation that a coin will be listed on an exchange has a contribution to the fundamental factors. These sample data can affect the changes of the economic landscape, thus, changing the mindset of the investors.
It is essential to understand the numerical value of each indicator (Total supply, circulating supply, market cap, price, etc.), as well as the market’s anticipation of that value. Whether you are an intermediate, medium, or long-term investor, fundamental analysis can help you maximize your interest.
If the technology is strong and the market opinion is generally positive, it attracts more investors into the project. A growing and innovative cryptocurrency most likely experiences a higher demand for its coin, which, in turn, increases the price.
In trading, the fundamental analysis is based on different criteria. You have to consider the potential profit sources that you want to target. You need to determine how somebody else’s loss can become your profit.
Lastly, large investors (whales) as well as the large companies and financial institutions, also contribute to the movement of the cryptocurrency market. These factors could become the reason for the mindset of the investors and traders.