Did you know that 80% of the cryptocurrencies that emerged in 2017 completely disappeared by 2020? 'Don't buy what you don't understand' - a golden rule that many ignore in the crypto world. How do you distinguish between projects with real value and those that will evaporate over time?
Fundamental analysis is the study of the intrinsic factors that determine the value of a project in the long term, away from daily price fluctuations. It is like inspecting the foundations of a house before buying it, not just being dazzled by the wall paint... A disgruntled accountant at a prestigious company invested in a crypto project due to its catchy name and colorful logo. After two months, the site and team disappeared, and she lost her investment. 'If I had done some basic research, I would have discovered that the project had no real product or known team,' she laments.
Here are the essential elements of simplified fundamental analysis:
- Team: Who are the founders and developers of the project? What are their previous experiences? Do they have a track record in the blockchain or technology field? A strong team is the first sign of a promising project.
- Problem and Solution: What problem is the project trying to solve? Is it a real problem worth solving? Is the proposed solution logical and innovative? Successful projects offer real solutions to real problems... not just trends or memes.
- Technology: Is the technology used advanced and suitable for the problem? Is there transparency in the source code? Serious projects publish their code for public review on platforms like GitHub.
- Roadmap: Does the project have a clear and logical development plan with a specific timeline? Is the team committed to the deadlines? Frequent delays are a warning sign!!
- Competition: What are the competing projects? What distinguishes this project from them? A project may have a strong concept and an innovative idea with a reliable team but may not be able to survive due to intense competition... In a crowded market, differentiation is essential for survival.
- Community and Communication: Does the project have an active and interactive community? Does the team communicate transparently with investors? Good projects build strong communities and maintain continuous communication.
+ Tokenomics: How are the tokens distributed? What is the retention ratio for founders and early investors? Is there a mechanism for burning tokens or reducing supply? Sound economics means sustainability in the long term.
Warren Buffett says: 'Price is what you pay, value is what you get.' In the crypto world, fundamental analysis is your compass to find true value amidst the noise of the market and the chaos of trends.
Remember that fundamental analysis does not guarantee success, but it significantly increases your chances. As Peter Lynch says: 'Knowing what you own and why you own it is a better investment than any mutual fund.'
In the next post, we will learn about the concept of simplified technical analysis - how to read market signals and predict price movements. Are you ready to learn the language of charts?
