Fundamental Analysis (FA)


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In the cryptocurrency market, it is very important to verify the real value and stability of the asset to make a long-term investment decision in any coin or token. And the most reliable method of determining this internal or real value is called Fundamental Analysis or FA for short. While technical analysis only deals with charts and price fluctuations, fundamental analysis goes beyond the charts and deeply evaluates the project team, technology, real-life usability, economic model and the overall market environment. In simple words, the main goal of this analysis is to find out whether the current market price of a cryptocurrency is less or more than its true potential. The first and main step in the fundamental analysis of a crypto project is to review its whitepaper and roadmap. A whitepaper is an institutional document that details the main purpose of the project, what real-world problem they are trying to solve and how their technical functionality is. In addition, the roadmap shows whether the project is able to complete the tasks as promised or not. The qualifications and past history of the developers or team members behind a project also play a big role in this analysis; because projects run by experienced and trusted teams are more likely to survive in the market. Another very sensitive and important part of fundamental analysis is to analyze the 'tokenomics' or the economic structure of the token. Under this, the total supply of the coin is seen, how much circulating supply is currently in the market, and what is the process of new coins coming to the market. If the supply of a token is unlimited and a lot of new coins are constantly coming to the market, there is a risk of its price decreasing in the long term due to inflation. On the other hand, as the demand for coins with limited supply increases, the price also increases rapidly. In addition, the proportion in which the tokens are distributed between the project founders, institutional investors, and the general public is also examined. In addition to the technical and economic structure, the network activity or user activity of that coin on-chain is also tracked through FA. For example, how many active wallets are being traded on that network every day, what is the total transaction volume, and how much assets are locked or staked (Total Value Locked - TVL) to ensure the security of the blockchain. In addition, the presence of large institutional investors or partners in the market and the strength of that crypto community are analyzed. No matter how advanced the technology of a project is, if it has no users or utility in real life, it is impossible to maintain its market value in the long term. In short, fundamental analysis is a powerful telescope to find real diamonds in the crowd of momentary hype or rumors in the crypto market. This helps a prudent investor to stay away from the market panic or FOMO and invest money only in quality projects. Although this analysis does not play a big role in overnight profits in the crypto market and it takes a long time to get its results, there is no substitute for fundamental analysis to protect your hard-earned capital from any scam or bankrupt project and build large amounts of wealth in the long term. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well. Amen.

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