Ustazulkhareem

A Chance to Earn Dollars Without Investment
The #BLUM token has emerged as one of the most talked-about cryptocurrency airdrops in recent times. Promising to be larger and more rewarding than its competitors, BLUM offers an incredible opportunity for participants to earn without any upfront investment. Crypto enthusiasts are encouraged to join this revolutionary project as soon as possible!
What is the BLUM Airdrop?
An airdrop is a marketing strategy employed by blockchain projects to distribute free tokens, attract users, and build a community. BLUM's airdrop has captured the attention of many, aiming to reward early supporters and incentivize widespread adoption. By distributing tokens to a broad audience, BLUM seeks to create awareness and lay the foundation for its long-term success in the crypto ecosystem.
Factors Influencing BLUM Token Price
The question on everyone’s mind is: What will BLUM’s price be after the airdrop? While exact predictions are challenging, several factors could shape its price trajectory:
1. Market Sentiment and Demand
BLUM’s initial price will largely depend on the community’s excitement and interest. A positive buzz around its use case and strong support from investors may drive a price surge in its early trading days.
2. Token Utility and Ecosystem
The token’s success hinges on its utility. A well-structured ecosystem offering unique benefits will attract users and developers, driving sustainable growth and potentially boosting the token’s value.
3. Overall Market Conditions
Cryptocurrency prices are highly volatile and influenced by market trends. A bullish market could amplify BLUM’s trading volume and price, while a bearish trend may limit its growth temporarily.
4. Listing on Major Platforms
One of the most significant price drivers is the listing on prominent trading platforms. These listings provide liquidity, attract new investors, and can trigger price spikes.
When Will BLUM Be Listed?
While an official listing date has not yet been confirmed, tokens are often listed shortly after the airdrop. A listing on well-known exchanges will be a key milestone for BLUM, enabling broader trading and increasing its visibility in the crypto market.
Typically, the listing process may take anywhere from a few weeks to a few months post-airdrop. To stay informed, participants are advised to follow BLUM’s official channels and news updates for timely announcements.
Conclusion
The BLUM airdrop has sparked excitement across the crypto community, offering a golden opportunity to participate in a promising project without any financial risk. While price predictions remain speculative, factors such as token utility, market conditions, and platform listings suggest strong potential for growth.
Stay tuned for official updates on the airdrop distribution and token listings!
Follow us for the latest news and announcements! 🔔

Key Takeaways

Technical analysis (TA) is a method that relies on price history and volume to forecast market trends.

TA can be done with simple support and resistance levels or with a combination of charting indicators like moving averages, RSI, MACD, and Bollinger Bands.

Trading signals can help us identify buying and selling opportunities, but TA indicators can also produce false signals, especially in lower time frames or low-liquidity markets. 

It’s important to do risk management and cross-confirmation with other methods to reduce risks.

Introduction

Technical analysis (TA) is a charting method used to forecast the price movements of assets by analyzing historical price data and trading volumes. Unlike fundamental analysis (FA), which considers multiple factors around the price of an asset, TA is strictly focused on historical price action and chart patterns. Traders use TA to identify trends, support and resistance levels, and potential entry and exit points for trades.​

When was TA created?

While primitive forms of technical analysis appeared in 17th-century Amsterdam and 18th-century Japan, the modern TA is often traced back to the work of Charles Dow.

A financial journalist and founder of The Wall Street Journal, Dow was among the first to observe that individual assets and markets often move in trends that could be segmented and analyzed. His work later gave birth to the Dow Theory, which encouraged further developments in technical analysis.

In the early stages, the rudimentary approach of technical analysis was based on hand-made sheets and manual calculations, but with the advance of technology and modern computing, TA became widespread and is now an important tool for many investors and traders.

How Does Technical Analysis Work?

TA operates on the premise that all known information is already reflected in an asset's price. So, by studying price patterns and trading volumes, traders can anticipate future price movements.​

At its core, TA is the analysis of the market forces of supply and demand, which are a representation of the overall market sentiment. In other terms, the price of an asset is a reflection of the opposing selling and buying forces, and these forces are closely related to the emotions of traders and investors (essentially fear and greed). 

Notably, TA is considered more reliable and effective in markets that operate under normal conditions, with high volume and liquidity. High-volume markets are less susceptible to price manipulation and abnormal external influences that could create false signals and render TA useless.

Common TA Indicators

Traders employ various technical indicators to analyze price movements and identify potential trading opportunities. Some of the most commonly used indicators include:​

1. Moving averages (MAs)

Simple Moving Average (SMA): Calculates the average price over a specific period, smoothing out short-term fluctuations.​

Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive to new information.​

Moving averages help identify the direction of the trend and potential support or resistance levels. For instance, a common strategy involves observing the crossover of short-term and long-term moving averages to signal potential buy or sell opportunities.​

2. Relative Strength Index (RSI)

RSI is a momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100. Traditionally, an RSI above 70 indicates overbought conditions, while an RSI below 30 suggests oversold conditions.​

3. Bollinger Bands (BB)

The Bollinger Bands (BB) indicator consists of two lateral bands that flow around a moving average line. These bands are used to measure market volatility and identify potential overbought or oversold conditions.​

4. Moving Average Convergence Divergence (MACD)

MACD is a trend-following momentum indicator that shows the relationship between two EMAs. It consists of the MACD line, signal line, and histogram, which can help identify potential buy or sell signals.​

Trading Signals

While indicators are useful for identifying general trends, they can also be used to generate trading signals that suggest potential entry or exit points:​

Overbought/oversold conditions: Indicators like the RSI can signal when an asset is overbought (potential sell signal) or oversold (potential buy signal).​

Moving average crossovers: A bullish signal occurs when a short-term moving average crosses above a long-term moving average (golden cross), while a bearish signal occurs when it crosses below (death cross).​

MACD signals: When the MACD line crosses above the signal line, it may indicate a bullish trend; crossing below may suggest a bearish trend.​

It's important to note that the trading signals provided by technical analysis are not always accurate. There is a considerable amount of noise (false signals) produced by TA indicators, especially with short-term trading. To reduce losses, it’s important to use TA indicators in conjunction with other analysis methods and risk management strategies.​

Criticism

TA is seen by many as a controversial and unreliable method and is often referred to as a “self-fulfilling prophecy,” referring to events that only happen because a large number of people assumed they would happen.

So, while TA is widely used, it has some limitations:​

Self-fulfilling prophecy: Some critics argue that TA works because many traders use the same indicators, leading to predictable outcomes.​

Subjectivity: Interpretation of charts and patterns can be subjective, leading to different conclusions among traders.​

Market anomalies: TA may be less effective during periods of high volatility or when markets are influenced by unforeseen events.​

Despite these criticisms, many traders find TA valuable, especially when combined with other forms of analysis.​ TA supporters argue that each chartist has a particular way of analyzing the charts and using the indicators available. This would imply that it’s virtually impossible for a large number of traders to use the same particular strategy.

Technical Analysis vs. Fundamental Analysis

While TA focuses on historical price data and patterns, fundamental analysis (FA) evaluates an asset's intrinsic value based on financial statements, economic indicators, and other qualitative factors.​

Technical analysis: Best suited for short-term trading strategies, helping identify optimal entry and exit points.​

Fundamental analysis: More appropriate for long-term investment decisions, assessing the overall health and potential of an asset.​

Many investors use a combination of both approaches to make informed decisions, leveraging the strengths of each method.​

Closing Thoughts

Besides the criticisms and the long-standing controversial debate about which method is better, many prefer to use a combination of both TA and FA. While FA usually relates to long-term investment strategies, TA may provide insightful information into short-term market conditions, which may be useful for all kinds of traders and investors.

Further Reading

5 Exit Strategies for Traders

5 Essential Indicators Used in Technical Analysis

7 Common Mistakes in Technical Analysis (TA)

Disclaimer: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Products mentioned in this article may not be available in your region. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

TL;DR

Crypto fundamental analysis involves taking a deep dive into the available information about a financial asset. For instance, you might look at its use cases, the number of people using it, or the team behind the project.

Your goal is to reach a conclusion on whether the asset is overvalued or undervalued. At that stage, you can use your insights to inform your trading positions.


Introduction

Trading assets as volatile as cryptocurrencies requires some skill. Selecting a strategy, understanding the vast world of trading, and mastering technical and fundamental analysis are practices that come with a learning curve.

When it comes to technical analysis, some expertise can be inherited from the legacy financial markets. Many crypto traders use the same technical indicators seen in Forex, stock, and commodities trading. Tools like RSI, MACD, and Bollinger Bands seek to predict market behavior irrespective of the asset being traded. As such, these technical analysis tools are also extremely popular in the cryptocurrency space.

In cryptocurrency fundamental analysis, though the approach is similar to that used in legacy markets, you can’t really use tried-and-tested tools to assess crypto assets. To conduct proper FA in cryptocurrencies, we need to understand where they derive value from.

In this article, we will attempt to identify metrics that can be used to craft your own indicators.


What is fundamental analysis (FA)?

Fundamental analysis (FA) is an approach used by investors to establish the "intrinsic value" of an asset or business. By looking at a number of internal and external factors, their main goal is to determine whether said asset or business is overvalued or undervalued. They can then leverage that information to strategically enter or exit positions.

Technical analysis also yields valuable trading data, but it results in different insights. TA users believe they can predict future price movements based on the past performance of assets. This is achieved by identifying candlestick patterns and studying essential indicators.

Traditional fundamental analysts generally look to business metrics to figure out what they view to be its real value. Indicators used include earnings per share (how much profit a company makes for each outstanding share), or the price-to-book ratio (how investors value the company versus its book value). They might do this for several businesses within a niche, for example, to figure out how their prospective investment stands in relation to others.

For a more comprehensive introduction to fundamental analysis, see What is Fundamental Analysis?


The problem with crypto fundamental analysis

Cryptocurrency networks can't really be assessed through the same lens as traditional businesses. If anything, the more decentralized offerings like Bitcoin (BTC) are closer to commodities. But even with the more centralized cryptocurrencies(such as those issued by organizations), traditional FA indicators can't tell us much.

So, we need to turn our attention to different frameworks. The first step in that process is to identify strong metrics. By strong, we mean ones that can't easily be gamed. Twitter followers or Telegram/Reddit users are probably not good metrics, for example, as it's easy to create fake accounts or buy engagement on social media.

It's important to note that there's no single measure that can give us a full picture of the network we're assessing. We could look at the number of active addresses on a blockchain and see that it has been sharply increasing. But that doesn't tell us much by itself. For all we know, that could be a standalone actor transferring money back and forth to themselves with new addresses each time.

In the following sections, we'll take a look at three categories of crypto FA metrics: on-chain metrics, project metrics, and financial metrics. This list will be non-exhaustive, but it should provide us with a decent foundation for the subsequent creation of indicators.


On-chain metrics


On-chain metrics are those that can be observed by looking at data provided by the blockchain. We could do this ourselves by running a node for the desired network and then exporting the data, but that can be time-consuming and expensive. Particularly if we're only considering the investment, and don't want to waste time or resources on the endeavor.

A more straightforward solution would be to pull the information from websites or APIs specifically designed for the purpose of informing investment decisions. For example, CoinMarketCap's on-chain analysis of Bitcoin gives us a myriad of information. Additional sources include Coinmetrics' Data Charts or Binance Research's project reports.


Transaction count

Transaction count is a good measure of activity taking place on a network. By plotting the number for set periods (or by using moving averages), we can see how activity changes over time.

Note that this metric should be treated with caution. As with active addresses, we can't be sure that there isn't just one party transferring funds between their own wallets to inflate the on-chain activity.


Transaction value

Not to be confused with the transaction count, the transaction value tells us how much value has been transacted within a period. For instance, if a total of ten Ethereum transactions, worth $50 each, were sent on the same day, we would say that the daily transaction volume was $500. We could measure this in a fiat currency like USD, or we could measure it in the protocol's native unit (ETH).


Active addresses

Active addresses are the blockchain addresses that are active in a given period. Approaches to calculating this vary, but a popular method is to count both the sender and receivers of each transaction over set periods (e.g., days, weeks, or months). Some also examine the number of unique addresses cumulatively, meaning that they track the total over time.


Fees paid

Perhaps more important for some crypto assets than others, the fees paid can tell us about the demand for block space. We could think of them as bids at an auction: users compete with each other to have their transactions included in a timely manner. Those bidding higher will see their transactions confirmed (mined) sooner, while those bidding lower will need to wait longer.

For cryptocurrencies with decreasing emission schedules, this is an interesting metric to study. The major Proof of Work (PoW) blockchains provide a block reward. In some, it's made up of a block subsidy and transaction fees. The block subsidy decreases periodically (in events such as the Bitcoin halving).

Because the cost to mine tends to increase over time, but the block subsidy is slowly reduced, it makes sense that transaction fees would need to rise. Otherwise, miners would operate at a loss and begin to drop off the network. This has a knock-on effect on the security of the chain.


Hash rate and the amount staked

Blockchains today use many different consensus algorithms, each with its own mechanisms. Given that these play such an integral role in securing the network, diving into the data surrounding them could prove valuable for fundamental analysis.

Hash rate is often used as a measure of network health in Proof of Work cryptocurrencies. The higher the hash rate, the more difficult it is to successfully mount a 51% attack. But an increase over time can also point to growing interest in mining, likely as a result of cheap overheads and higher profits. Conversely, a decrease in hash rate points to miners going offline ("miner capitulation") as it's no longer profitable for them to secure the network.

Factors that can influence the overall costs of mining include the current price of the asset, the number of transactions processed, and fees being paid, to name a few. Of course, the direct costs of mining (electricity, computing power) are also important considerations.

Staking (in Proof of Stake, for example) is another related concept with similar game theory to PoW mining. Insofar as the mechanisms, though, it works differently. The basic idea is that users stake their own holdings to participate in block validation. As such, we could look to the amount staked at a given time to gauge interest (or lack of it).


Project metrics


Where on-chain metrics are concerned with observable blockchain data, project metrics involve a qualitative approach, which looks to factors like the performance of the team (if any exists), the whitepaper, and the upcoming roadmap.


The whitepaper

It's highly recommended that you read the whitepaper of any project before investing. This is a technical document that gives us an overview of the cryptocurrency project. A good whitepaper should define the goals of the network, and ideally give us an insight into:

The technology used (is it open source?)

The use case(s) it aims to cater to

The roadmap for upgrades and new features

The supply and distribution scheme for coins or tokens

It's wise to cross-reference this information with discussions of the project. What are other people saying about it? Are there any red flags raised? Do the goals seem realistic?


The team

If there's a specific team behind the cryptocurrency network, its members' track records can reveal whether the team has the required skills to bring the project to fruition. Have members undertaken successful ventures in this industry previously? Is their expertise sufficient to reach their projected milestones? Have they been involved in any questionable projects or scams?

If there is no team, what does the developer community look like? If the project has a public GitHub, check to see how many contributors there are and how much activity there is. A coin whose development has been constant may be more appealing than one whose repository hasn't been updated in two years.


Competitors

A strong whitepaper should give us an idea of the use case the crypto asset is targeting. At this stage, it's important to identify the projects it's competing with, as well as the legacy infrastructure it seeks to replace.

Ideally, fundamental analysis of these should be just as rigorous. An asset may look appealing by itself, but the same indicators applied to similar crypto assets could reveal ours to be weaker than the others.


Tokenomics and initial distribution

Some projects create tokens as a solution looking for a problem. Not to say that the project itself isn't viable, but its associated token may not be particularly useful in this context. As such, it's important to determine whether the token has real utility. And, by extension, whether that utility is something that the wider market will recognize, and how much it would likely value the utility at.

Another important factor to consider on this front is how the funds were initially distributed. Was it via an ICO or IEO, or could users earn it by mining? In the case of the former, the whitepaper should outline how much is kept for the founders and team, and how much will be available to investors. In the case of the latter, we could look to evidence of the asset's creator premining (mining on the network before it's announced).

Focusing on the distribution might give us an idea of any risk that exists. For instance, if the vast majority of the supply was owned by only a few parties, we might reach the conclusion that this is a risky investment, as those parties could eventually manipulate the market.



Financial metrics


Information about how the asset currently trades, what it traded at previously, liquidity, etc. can all come in handy in fundamental analysis. However, other interesting metrics that might fall under this category are those that concern the economics and incentives of the crypto asset's protocol.


Market capitalization

Market capitalization (or network value) is calculated by multiplying the circulating supply with the current price. Essentially, it represents the hypothetical cost to buy every single available unit of the crypto asset (assuming no slippage).

By itself, market capitalization can be misleading. In theory, it would be easy to issue a useless token with a supply of ten million units. If just one of those tokens was traded for $1, then the market cap would be $10 million. This valuation is obviously distorted – without a strong value proposition, it's unlikely that the wider market would be interested in the token.

On a related note, it's impossible to truly determine how many units are in circulation for a given cryptocurrency or token. Coins can be burned, keys can be lost, and funds can simply be forgotten about. What we see instead are approximations that attempt to filter out coins that are no longer in circulation.

Nonetheless, market capitalization is used extensively to figure out the growth potential of networks. Some crypto investors view "small-cap" coins to be more likely to grow compared to "large-cap" ones. Others believe large-caps to have stronger network effects, and, therefore, stand a better chance than unestablished small-caps.


Liquidity and volume

Liquidity is a measure of how easily an asset can be bought or sold. A liquid asset is one that we'd have no problem selling at its trading price. A related concept is that of a liquid market, which is a competitive market flooded with asks and bids (leading to a tighter bid-ask spread).

A problem we might encounter with an illiquid market is that we're unable to sell our assets at a "fair" price. This tells us there are no buyers willing to make the trade, leaving us with two options: lower the ask or wait for liquidity to increase.

Trading volume is an indicator that can help us determine liquidity. It can be measured in a few ways and serves to show how much value has been traded within a given time period. Typically, charts display the daily trading volume (denominated in native units or in dollars).

Being familiar with liquidity can be helpful in the context of fundamental analysis. Ultimately, it acts as an indicator of the market's interest in a prospective investment.


Supply mechanisms

To some, the supply mechanisms of a coin or token are some of the most interesting properties from an investment standpoint. Indeed, models like the Stock-to-Flow (S2F) ratio are growing in popularity amongst Bitcoin proponents.

Maximum supply, circulating supply, and rate of inflation can inform decisions. Some coins reduce the number of new units they produce over time, making them attractive to investors that believe the demand for new units will outstrip their availability. 

On the other hand, different investors might see a rigidly enforced cap as damaging in the long run. Such concerns may be that it disincentivizes the use of the coins/tokens as users opt instead to hoard them. Another criticism is that it disproportionately rewards early adopters, whereas a steady inflationary policy would be fairer for newcomers.


Fundamental analysis indicators, metrics, and tools

We’ve already defined metrics as quantitative and sometimes qualitative data used in basic analysis. But on their own, these metrics often don’t tell the whole story. To get deeper insights into a coin’s fundamentals, we should also take a look at indicators.

An indicator often combines multiple metrics using statistical formulas to create easier to analyze relationships. However, there is still a lot of overlap between a metric and an indicator, making the definition quite loose. 

While the number of active wallets is valuable, we can combine it with other data to gain deeper insights. You could take this as a percentage of total wallets or divide a coin’s market cap by the number of active wallets. This calculation would give you an average amount held per active wallet. Both of these would allow you to draw conclusions on the network’s activity and users’ confidence in holding the asset. We’ll dive into this deeper in the next section.

Fundamental analysis tools make gathering all these metrics and indicators easier. While you can look at the raw data on blockchain explorers, an aggregator or dashboard is a more efficient use of your time. Some tools allow you to create your own indicators with your chosen metrics.


Combining metrics and creating FA indicators

Now that we're familiar with the difference between metrics and indicators, let's talk about how we combine metrics to better understand the financial health of the assets we're dealing with. Why do this? Well, as we've outlined in the previous sections, there are shortcomings with every metric. Furthermore, if you're just looking at a collection of numbers for each cryptocurrency project, you're overlooking a lot of crucial information. Consider the following scenario:


Coin A

Coin B

Market Capitalization

$100,000,000

$5,000,000

Transaction count (6mo)

20,000,000

40,000,000

Avg. transaction value (6mo)

$50

$100

Active addresses (6mo)

30,000

2,000


In isolation, active addresses tell us nothing of substance if we compare the two offerings. We could certainly say that Coin A has had more active addresses in the past six months than Coin B, but that's far from a comprehensive analysis. How does this figure relate to the market cap? Or the transaction count?

A more prudent approach would be to create some kind of ratio that we could apply to some of Coin A's statistics, then compare it with that same ratio used on Coin B's. That way, we're not blindly comparing each coin's individual metrics. Instead, we can create a standard for valuing coins independently. 

For example, we might decide that the relationship between market cap and transaction count is a lot more telling than market cap alone. In which case, we might divide the market cap by the transaction count. For Coin A, we end up with a ratio of 5, and for Coin B our ratio is 0.125.

Going on this ratio alone, we might think that Coin B is more intrinsically valuable than Coin A because the number calculated is lower. What that means is that there is a much higher amount of transactions in relation to the market cap in Coin B. Therefore, it could seem that Coin B has more utility, or that Coin A is being overvalued. 

Neither of these observations should be construed as investment advice – this is simply an example of how we might paint a small piece of the bigger picture. Without understanding the projects' goals and the coins' function, you can't determine whether the comparatively smaller transaction number on Coin A is a positive or negative development.

A similar ratio that has seen some popularity in the cryptocurrency markets is the NVT ratio. Coined by analyst Willy Woo, the network value-to-transaction ratio has been called the "price-to-earnings ratio of the crypto world." In simple terms, it involves dividing the market capitalization (or network value) by the amount transacted (typically on a daily chart).

We're only scratching the surface on the kinds of indicators that can be used. Fundamental analysis is all about developing a system that can be used to value projects across the board. The more quality research we do, the more data we have to work with.


Key FA indicators and metrics

There are a huge number of indicators and metrics available to choose from. For a beginner, start with some of the most popular ones first. Each indicator only tells part of the story, so use a variety of them in your analysis.


Network Value to Transactions Ratio (NVT)

If you’ve heard of the price-to-earnings ratio used to analyze stocks, then the network transaction value indicator (daily) provides a similar analysis. It’s calculated simply by dividing a coin’s market capitalization by the daily transaction volume. 

We use the daily transaction volume as a stand-in for the underlying, inherent value of a coin. This concept works on the assumption that the more volume moving around the system, the more value the project has. If a coin’s market cap increases while daily transaction volume lags, the market could enter bubble territory. Prices are rising without there being a matched increase in the underlying value. In the opposite case, a coin or token’s price may stay stable while daily transaction volume increases. This scenario could suggest a possible buying opportunity.

The higher the value of the ratio, the more likely a bubble will occur. This point is usually seen when the NVT ratio is above 90-95. A decreasing ratio indicates that the crypto is becoming less overvalued. 


Market Value to Realized Value Ratio (MVRV)

Before we dive into this statistic, we need to understand what realized value means for a crypto asset. Market value, otherwise known as market cap, is simply the total supply of coins multiplied by the current market price. Realized value, on the other hand, discounts for coins lost in inaccessible wallets. 

Coins sat in wallets are instead valued using the market price at the time of their last movement. For example, a Bitcoin lost in a wallet since February 2016 will only be valued at around $400.

To get our MVRV indicator, we simply divide the market cap by the realized cap. If the market cap is much higher than the realized cap, we’ll end up with a relatively high ratio. A ratio over 3.7 suggests a sell-off may occur as traders take their profits due to the coin’s overvaluation. 

This number signifies that the coin may currently be overvalued. You can see this before two large Bitcoin sell-offs in 2014 (MRVR of roughly 6) and 2018 (MRVR of approximately 5). If the value is too low and under 1, the market is undervalued. This situation would be a good point to buy as buying pressure increases and drives up the price.


Stock-to-flow model

The stock-to-flow indicator is a popular indicator of the price of a cryptocurrency, typically with a limited supply. The model looks at each cryptocurrency as a fixed, scarce resource similar to precious metals or stones. Because there is a known limited supply without new sources to be found, investors use these assets as a store of value.

We calculate the indicator by taking the total circulating global supply and dividing it by the amount produced per year. In Bitcoin, you can do this with easily found circulation figures and data on newly mined coins. Decreasing returns from mining leads to a higher ratio reflecting its scarcity, making the asset more valuable. As Bitcoin goes through a reward halving event periodically, we can see this reflected in the flow of new coins into the market.



As you can see, stock-to-flow has been a reasonably good indicator of the price of Bitcoin. Bitcoin’s price has been superimposed on the 365 day average of the ratio and shows a good match. The model does have some drawbacks, however. 

For example, gold currently has a stock-to-flow ratio of around 60, meaning it would take 60 years to mine the current supply of gold at the current flow. Bitcoin will roughly be on track to have a ratio of 1600 in around 20 years, setting price predictions and a market cap higher than the world’s current wealth. 

Stock-to-flow models also struggle when deflation happens, as this would suggest a minus price. As people lose the keys to their wallets and no more bitcoins are produced, we would see a negative ratio. We would see the stock-to-flow ratio flow go towards infinity and then become minus if we displayed this graphically.

If you’re interested in learning more about the model, check out our Bitcoin and the Stock to Flow Model guide.


Examples of Fundamental Analysis tools

Baserank

Baserank is a research platform for crypto assets that aggregates information and reviews from analysts and investors. The crypto receives an overall score from 0 to 100 after taking an average of each review’s score. While there are some premium reviews for subscribers, free users can still see a comprehensive overview of reviews broken down into sections, including team, utility, and investment risk. If you’re short of time and need a rapid overview of a project or coin, an aggregator like Baserank is suitable for the task. You should always, however, dive deeper into projects you’re interested in before investing.


Crypto Fees

As you might have guessed from the name, this tool shows you each network’s fees for the past 24 hours or seven days. It’s an easy metric to use when analyzing the traffic and usage of a blockchain network. Networks with high fees are typically experiencing great demand.

However, you shouldn’t just take this metric at face value. Some blockchains are built with low fees in mind, making a comparison with other networks challenging. In these cases, it’s best to look at the figure in tandem with the transaction amount or another metric. For example, large market cap coins such as Dogecoin or Cardano are low in the overall charts due to their cheap transaction fees.


Glassnode Studio

Glassnode Studio offers a dashboard displaying a wide range of on-chain metrics and data. Like most tools on offer, it is subscription-based. However, the amount of free on-chain data it offers is suitable for amateur investors and quite in-depth. It’s much easier to find all the information in one place rather than gather it yourself using blockchain explorers. Glassnode’s main strength is the vast number of metric categories and subcategories you can browse. However, if you’re interested in BNB Chain projects, you’re very limited here.

For anyone who wants to combine their metrics with technical analysis, Glassnode Studio also has built-in TradingView with all its charting tools. It’s common for investors and traders to combine multiple types of analysis when making decisions. Being able to do this all in one place is a plus.


Closing thoughts

Done correctly, fundamental analysis can provide invaluable insights into cryptocurrencies in a way that technical analysis cannot. Being able to separate the market price from the "true" value of a network is an excellent skill to have when trading. Of course, there are things that TA can tell us that can’t be predicted with FA. That’s why many traders use a combination of both these days.

As with many strategies, there's no one-size-fits-all FA playbook. Hopefully, this article will have helped you understand some of the factors to consider before entering or exiting positions with crypto assets.

TL;DR
Cryptocurrency trading, or the buying and selling of digital assets like Bitcoin and Ethereum, has emerged as a dynamic and potentially lucrative endeavor.For beginners, it’s essential to understand what makes cryptocurrency unique, familiarize yourself with common trading concepts such as order books, trading pairs, and order types, and become comfortable with technical analysis charts and tools.This comprehensive guide will teach beginners all this foundational knowledge and prepare you to embark on your crypto trading journey. 
What Is Cryptocurrency Trading?  
Cryptocurrency trading, or the buying and selling of digital assets like Bitcoin (BTC) and Ethereum (ETH), has emerged as a dynamic and potentially lucrative endeavor. As cryptocurrencies continue to captivate global interest and more institutional investors join the sector, cryptocurrency trading is gaining increasing popularity.
Cryptocurrency trading often aims to capitalize on price fluctuations. Traders aim to buy these cryptocurrencies when prices are low and sell when prices surge, effectively profiting from the market's volatility. This fast-paced landscape presents both opportunities and challenges for beginners.
For those intrigued by the prospect of engaging in cryptocurrency trading, a comprehensive understanding of the market's intricacies is paramount. This guide aims to equip beginners with the foundational knowledge necessary to navigate this potentially rewarding landscape.
What Are Cryptocurrencies? 
Cryptocurrencies have taken the financial world by storm, redefining how we perceive money and transactions. 
Cryptocurrencies, like Bitcoin and Ethereum, are digital currencies that employ an innovative technology known as blockchain to ensure their security and integrity.
Unlike regular money from banks, cryptocurrencies aren't controlled by any one big company or government. Instead, cryptocurrencies are like public digital record books that anyone around the world can see and keep a copy of. 
As a result, cryptocurrencies are global, secure, and transparent. You can generally send and receive these coins to anyone in the world, at a faster speed without extra fees or paperwork required by banks. 
People often say that cryptocurrencies are decentralized, which is another way of saying that they are not controlled by a centralized entity. Essentially, you own your own digital wallet that gives you more freedom and control over your money. 
How to Start Trading Cryptocurrency 
Getting started with cryptocurrency trading requires a thoughtful approach and careful preparation. 
Before diving into the world of cryptocurrency trading, it's crucial to invest time in learning. You can rely on Binance Academy’s educational courses to understand the basic trading concepts and specific cryptocurrencies you're interested in trading. 
Selecting a reliable cryptocurrency exchange is critical. A good guideline is to opt for an exchange with a proven long-term track record, an excellent reputation, strong security protocols, and responsive customer support.
For newcomers, beginning with a centralized exchange is recommended. As you gain more experience in cryptocurrency trading, you can explore decentralized exchanges at a later stage."
Once you've chosen an exchange, the next step is to create your account. This usually involves providing your email, setting a password, and agreeing to terms. Sometimes, exchanges require identity verification to comply with regulatory standards. You would need to submit a government-issued ID, proof of residence, and any other documents to complete setting up your account. 
A Beginner's Guide to Cryptocurrency Trading
After you create an account, you can deposit fiat currency into your account. Most centralized exchanges allow users to deposit fiat via bank transfers, bank wires, or other common money transfer methods. 
If you happen to own some crypto already, you can deposit it into your exchange account. Remember to always send your coins to the associated address: send Bitcoin to your Bitcoin address, ether to your Ethereum address, and so on. Sending crypto to the wrong addresses could result in losses.
Now you’re set up for trading crypto, let’s quickly go through a few essential trading concepts for beginners. 
1. Trading pairs 
There are two main types of trading pairs: crypto-to-crypto trading pairs and crypto-to-fiat trading pairs. 
Crypto-to-crypto trading pairs involve two different cryptocurrencies, such as the ETH/BTC trading pair. If the current value of one Ethereum (ETH) is 0.05 Bitcoin (BTC), this means you would need to exchange 0.05 BTC to acquire one ETH. The value of ETH is expressed in terms of BTC in this pairing.
Crypto-to-fiat trading pairs involve a cryptocurrency and a traditional fiat currency, such as the BTC/USD trading pair.  If the current value of one Bitcoin (BTC) is $40,000 in US dollars (USD), this indicates that one Bitcoin is equivalent to $40,000. 
2. Order books 
An order book is a real-time, dynamic list of buy and sell orders placed by traders on a cryptocurrency exchange. It provides a snapshot of the supply and demand for a specific cryptocurrency at different price levels. 
An order book is split into two main sections: the buy orders (bids) and the sell orders (asks). Buy orders list the orders from traders who want to buy the cryptocurrency at a certain price, organized from the highest bid price to the lowest. 
Sell orders display the orders from traders who want to sell the cryptocurrency at a particular price, organized from the lowest ask price to the highest.
3. Market orders 
A market order is the simplest type of order, in which you buy or sell crypto immediately at the best available price in the market. Let's say the current highest bid, or buy order, for one bitcoin is 35,000 dollars, while the lowest ask, or sell order, is 35,010 dollars in the order book. If you place a market order to buy bitcoins, your order would be matched with the lowest ask, which is 35,010 dollars. If you place a market order to sell bitcoin, your order would be matched with the highest bid at 35,000 dollars.
4. Limit orders 
A limit order is an order to buy or sell a crypto at a specific price or better. For example, if you want to buy one bitcoin for $35,000 or less, you can set a buy limit order at $35,000. If the price drops to $35,000 or less, your limit order will be executed and you'll purchase bitcoin at that price. But if the price never drops to $35,000, your order won't be executed.
How To Use Crypto Wallets
A cryptocurrency wallet is a digital tool that enables you to store, send, and receive digital assets. 
For beginners, a software wallet, often referred to as a hot wallet, is generally recommended. This type of wallet is user-friendly and easily accessible through desktop or mobile applications. It also offers a familiar and convenient user experience, and usually comes with customer support. 
You can use hot wallets from crypto exchanges or download popular ones in the market, such as MetaMask. A hot wallet offers numerous benefits compared to your exchange account, including being able to do peer-to-peer transactions (without relying on an exchange) and exploring various decentralized finance (DeFi) services. 
When using crypto wallets, it's essential to follow good security practices such as enabling two-factor authentication (2FA), using strong and unique passwords, and keeping backups of your recovery seed or private keys in a safe place. 
As you become more comfortable with cryptocurrency, you can explore cold wallets that offer a different set of advantages and limitations. 
Which Cryptocurrency You Should Buy?
As a beginner in the world of cryptocurrency trading, deciding which cryptocurrencies to buy can be daunting. Here are some tips. 
Most people start with well-known and established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). These have a proven track record and are less risky options for beginners. 
If you're considering exploring lesser-known cryptocurrencies, it's crucial to fully comprehend the associated risks, including the possibility of losing your entire investment. 
Keep in mind that in the world of investing, risks and potential returns often go hand in hand. Taking on higher risks might lead to greater potential returns, although it also raises the likelihood of losing your invested capital.
Starting small is good for beginners, as this allows you to learn and gain experience without risking too much capital. 
Lastly, a common mistake beginners should avoid is FOMO (Fear of Missing Out): Don’t rush into buying a cryptocurrency just because it's surging in price. 
Different Types of Cryptocurrency Trading
There are many crypto trading strategies that you can employ, each with its own set of risks and rewards. Let’s go through some of the most popular crypto trading approaches. 
Day trading
Day trading is a strategy that involves entering and exiting positions within the same day. Because cryptocurrency markets are open 24/7, day trading in cryptocurrency tends to refer to a trading style where the trader enters and exits positions within 24 hours.
In day trading, you’ll often rely on technical analysis to determine which assets to trade. Because profits in such a short period can be minimal, you may opt to trade across a wide range of assets to try and maximize your returns. That said, some might exclusively trade the same pair for years.
This style is a very active trading strategy. It can be highly profitable, but it carries with it a significant amount of risk. 
Swing trading
In swing trading, you’re still trying to profit off market trends, but the time horizon is longer – positions are typically held anywhere from a couple of days to a couple of months. 
Your goal will be to identify an asset that looks undervalued and is likely to increase in value. You would purchase this asset, then sell it when the price rises to generate a profit. Or you can try to find overvalued assets that are likely to decrease in value. Then, you could sell some of them at a high price, hoping to buy them back for a lower price.
Swing trading tends to be a more beginner-friendly strategy, mainly because it doesn’t come with the stress of fast-paced day trading. 
Position trading (trend trading)
Position trading is a long-term strategy. Traders purchase assets to hold for extended periods (generally measured in months). Their goal is to make a profit by selling those assets at a higher price in the future.
Position traders are concerned with trends that can be observed over extended periods – they’ll try to profit from the overall market direction. Swing traders, on the other hand, typically seek to predict “swings” in the market that don’t necessarily correlate with the broader trend.
Like swing trading, position trading is an ideal strategy for beginners. Once again, the long time horizon gives them ample opportunity to deliberate on their decisions.
Scalping
Of all of the trading strategies discussed so far, scalping takes place across the smallest time frames. Scalpers attempt to game small fluctuations in price, often entering and exiting positions within minutes (or even seconds). 
In most cases, they’ll use technical analysis to try and predict price movements and exploit bid-ask spreads or other inefficiencies to make a profit. Due to the short time frames, scalping usually has thin profit margins. Scalpers generally trade large amounts of assets in order to achieve sizable profits.  
Scalping is generally more suitable for experienced traders. For beginner traders who know what they’re doing, however, identifying the right patterns and taking advantage of short-term fluctuations can be highly profitable.
HODLing 
Long-term investors, also known as "HODLers," aim to benefit from the overall growth of the cryptocurrency market. They buy and hold cryptocurrencies for an extended period, often months or years. 
HODLing is ideal for those who believe in the long-term potential of specific cryptocurrencies such as Bitcoin or Ethereum and are willing to weather short-term price fluctuations. While this strategy requires patience, it may provide substantial returns over time. 
Technical Analysis and Chart Reading in Cryptocurrency Trading
Technical analysis is the art of interpreting price charts, recognizing patterns, and harnessing indicators to anticipate potential price movements. They are useful analytical tools that can greatly enhance your ability to make well-informed trading decisions.
1. What is a candlestick chart?
A candlestick chart is a graphical representation of the price of an asset for a given timeframe. It’s made up of candlesticks, each representing the same amount of time. 
For example, a 1-hour chart shows candlesticks that each represent a period of one hour. A 1-day chart shows candlesticks that each represent a period of one day, and so on.
Daily chart of Bitcoin. Each candlestick represents one day of trading.
A candlestick is made up of four data points: the Open, High, Low, and Close (also referred to as the OHLC values). The Open and Close are the first and last recorded price for the given timeframe, while the Low and High are the lowest and highest recorded price, respectively. 
2. What is a candlestick chart pattern?
A candlestick chart pattern is a visual representation of price movements in the form of candlesticks. It provides insights into the open, close, high, and low prices of a cryptocurrency or financial asset over a specific time period. 
A candlestick consists of two main parts: the body and the wicks (also known as shadows). The body represents the price range between the opening and closing prices of the trading session. 
If the closing price is higher than the opening price, the body is typically filled or colored in, often with green or white, to indicate a bullish session. Conversely, if the opening price is higher than the closing price, the body is empty or colored in red or black, signaling a bearish session.
The wicks, which extend from the top and bottom of the body, represent the price range between the highest and lowest prices reached during the trading session. The upper wick extends from the top of the body and indicates the session's highest price, while the lower wick extends from the bottom of the body and signifies the lowest price.
Candlestick charts offer valuable insights into market sentiment and price trends. Traders use patterns formed by multiple candlesticks to identify potential trend reversals or continuations. Common patterns include "Doji," "Hammer," "Shooting Star," and "Engulfing," each with its own implications for price movements.
3. What is a trend line?
Trend lines are a widely used tool by both traders and technical analysts. They are lines that connect certain data points on a chart. 
The main idea behind drawing trend lines is to visualize certain aspects of the price action. This way, traders can identify the overall trend and market structure.

The price of Bitcoin touching a trend line multiple times, indicating an uptrend.
Some traders may only use trend lines to get a better understanding of the market structure. Others may use them to create actionable trade ideas based on how the trend lines interact with the price.
Trend lines can be applied to a chart showing virtually any time frame. However, as with any other market analysis tool, trend lines on higher time frames tend to be more reliable than trend lines on lower time frames. 
Another aspect to consider here is the strength of a trend line. The conventional definition of a trend line defines that it has to touch the price at least two or three times to become valid. Typically, the more times the price has touched (tested) a trend line, the more reliable it may be considered.
4. What are support and resistance?
Support means a level where the price finds a “floor.” In other words, a support level is an area of significant demand, where buyers step in and push the price up.
Resistance means a level where the price finds a “ceiling.” A resistance level is an area of significant supply, where sellers step in and push the price down.

Support level (red) is tested and broken, turning into resistance.
Technical indicators, such as trend lines, moving averages, Bollinger Bands, Ichimoku Clouds, and Fibonacci Retracement can also suggest potential support and resistance levels. 
Fundamental Analysis: Determining Intrinsic Value of Cryptocurrencies  
Fundamental analysis involves a deep dive into the intrinsic value of a cryptocurrency project, examining its technology, team, adoption potential, and overall viability. 
Generally, you should try to understand the underlying technology of a cryptocurrency project. Delve into its blockchain architecture, consensus mechanism, and scalability. A robust and innovative technology can indicate a project's ability to solve real-world problems and gain adoption.
You should also research the team behind the cryptocurrency project. Evaluate their expertise, experience, and track record. A talented and experienced team increases the likelihood of successful project execution.
A cryptocurrency’s tokenomics are of paramount importance, as they determine the cryptocurrency’s total supply, distribution, and its incentive mechanisms. These are factors that often have a direct impact on the cryptocurrency’s price movements. 
Fundamental analysts also look into the project's adoption potential in the real world. Factors such as partnerships, use cases, community engagement, and market demand could also influence prices. 
Fundamental analysis equips yourself with the tools to assess a cryptocurrency project's underlying value. This strategic approach enables you to navigate the complex cryptocurrency landscape with a long-term perspective, making trading decisions that align with a project's viability and potential.
Risk Management in Cryptocurrency Trading
Effective risk management is essential for your crypto trading success. 
Risk management refers to predicting and identifying the financial risks involved with your investments, and minimizing them by employing a set of strategies. 
There are numerous risks in cryptocurrency trading, including regulatory risk, market risk, operational risk, liquidity risk, and security risk. Fortunately, there are risk management strategies you can employ to help keep your risk exposure at a reasonable level. Let’s look at a few popular strategies.  
1. Diversification
Diversifying your portfolio is one of the most popular fundamental tools to reduce your overall investment risk. You can hold a variety of different coins and tokens, keep each position at an appropriate size and constantly rebalance the portfolio, so you won't be too heavily invested in any one asset. This can minimize the chance of oversized losses. 
2. Hedging 
You can also hedge your holdings, which means taking a position in a related asset that is expected to move in the opposite direction of the primary position. The purpose is to offset potential losses. 
If you own $10,000 worth of Bitcoin and want to hedge against a possible decrease in its price, you could buy a put option for a premium of $500 that gives you the right to sell bitcoin at $50,000 at a future date. If Bitcoin's price falls to $40,000, you can exercise your option and sell your bitcoin for $50,000, significantly reducing your losses. 
3. Use advanced order types 
You can utilize advanced order types to lock in profits or protect yourself from losses. For instance, stop-loss orders allow traders to limit losses when a trade goes wrong. Take-profit orders ensure that you lock in profits when a trade goes well. 
4. Follow the 1% rule
Another strategy you can follow is the 1% rule, where you don’t risk any amount more than 1% of your total capital on a single position. For instance, if you have $10,000 to invest and want to adhere to the 1% rule, you could buy $10,000 of Bitcoin and set a stop-loss order to sell at $9,900. This way, you would limit your losses to 1% of your total investment capital.
5. Have an exit strategy
It’s always a good idea to plan for the worst. So having an exit strategy is an essential way to manage your risks. It's easy for us to get caught up in a bull market and its euphoria, but having a plan to exit your position can help lock in gains. 
One way is to use limit orders to take profit or place a floor on maximum loss that you can stand. As a general rule of thumb, once you have your exit plan, you should stick to it. 
6. Do Your Own Research (DYOR) 
It's essential to emphasize the importance of "Do Your Own Research!" This principle is so vital within the crypto community that it's commonly referred to by its acronym, D-Y-O-R. Before investing in a token, coin, project, or other asset, you must do your due diligence. It's key that you assess essential information about an asset to fully understand its risks. If you want to invest in an ICO, ensure you read the white paper and understand the tokenomics, roadmap, and communities before you make the jump!
In summary, investing in crypto can be risky, but there are many ways you can manage those risks effectively. 

Closing Thoughts 
Congratulations on completing this comprehensive guide to cryptocurrency trading for beginners! You should be better prepared to begin your crypto trading journey, equipped with essential knowledge and tools to navigate this exciting landscape.
As you venture into the realm of cryptocurrency trading, remember that learning is an ongoing process. Markets can be unpredictable, and cryptocurrency markets are particularly volatile. With continued learning, however, you are well on your way to become a better crypto trader with each practical trading experience you gain. 
Always prioritize research, education, and risk management in your trading journey. Stay informed about the latest developments in the crypto space, continue refining your skills, and adapt your strategies as needed. 

Disclaimer and Risk Warning: This content is presented to you on an “as is” basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the article is contributed by a third party contributor, please note that those views expressed belong to the third party contributor, and do not necessarily reflect those of Binance Academy. Please read our full disclaimer here for further details. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. This material should not be construed as financial, legal or other professional advice. For more information, see our Terms of Use and Risk Warning.

TL;DR

Choosing a crypto wallet depends on your needs. Security, custodianship, and interacting with smart contracts are key points to consider. You also may want to access your wallet on different devices.

For browser extension wallets, MetaMask, MathWallet, and Binance Wallet are good options. If you prefer a mobile experience, MetaMask, MathWallet, Trust Wallet and SafePal are available for iOS and Android. They’re decentralized and store your private key on your device. SafePal also offers a cold storage hardware wallet for anyone looking for the highest security. Apart from the hardware version, all crypto wallets mentioned are free to use.

Introduction

BNB Smart Chain (BSC) is relatively new, so not all wallets currently support BEP-20 tokens. When you find a BSC supporting wallet, there are a few types and options to choose from. Custodianship, security, and usability are important to consider, and everyone has their top priorities. The five wallets below all differ slightly, so your best bet is to try them and see what you prefer.

What type of crypto wallet should I use?

Before you choose a specific wallet, think about what you need. There’s more than just one type of wallet out there. Most BSC wallets will be non-custodial, meaning you have control of your private key. BSC wallets are also typically hot wallets that allow you to quickly connect to DApps or start staking. Each type has its advantages and disadvantages.

1. Custodial - The wallet provider holds your private key. This is the case with your digital assets in an exchange’s wallet. Without owning your private key, you aren’t entirely in control of your wallet. Likely, you won’t be able to connect to DApps either. For example, if you only want to spot trade BSC tokens and other cryptoassets, a custodial wallet is a reasonable choice. But be careful. While this is safe to do on Binance, you should not trust your funds to any custodial wallet or exchange. 

2. Non-custodial - You own your private keys. It’s the safest option for most traders and investors, as long as they take good care of their keys and seed phrases. The wallets we’ll cover later are all non-custodial options that allow you to interact with DApps.

3. Hot wallets - These crypto wallets are connected to the internet and are typically non-custodial (unless you’re using a centralized exchange). Hot wallets are convenient for making transactions but come with some security risks. Your private key is held online with your public key and is usually accessible with a user-set password. Like any password-protected service, you could be hacked or phished. To mitigate the risks, you should also use two-factor authentication (2FA) methods.

4. Cold wallet - You store your private key offline on specialized hardware. This option is the most secure way to hold your BSC tokens, but it’s often the most impractical method for making transactions and interacting with DApps.

You can easily use a combination of the above to combine their strengths. However, for day-to-day transactions and DeFi applications, a non-custodial hot wallet is a robust and flexible option. Let’s take a look at some of the most popular options.

MetaMask

MetaMask is a browser extension and mobile app crypto wallet supporting BSC and other blockchains, including Ethereum, Polygon, and BNB Chain. MetaMask was developed in 2016 by ConsenSys, a prominent blockchain company. For many years, MetaMask only offered their extension, which is why it’s still their most popular product.

The MetaMask browser extension allows you to make transactions and interact with smart contracts and DApps.

MetaMask also lets you connect to different blockchain networks (you can add custom mainnets). It also allows you to sign transactions, manage your public and private keys, and offers a Swaps service that provides the best prices from multiple Decentralized Exchanges (DEXs). MetaMask is a popular choice with BSC users for its simplicity and ease of use.

Binance Web3 Wallet 

The Binance Web3 Wallet is a decentralized digital wallet designed for secure and seamless access to DeFi and Web3 applications. It enables users to manage cryptocurrencies, participate in decentralized exchanges, and engage with DeFi protocols directly on blockchain networks without intermediaries.

Integrated with the Binance ecosystem, the wallet supports multiple blockchains, including Ethereum and BNB Smart Chain, allowing users to manage a diverse portfolio of digital assets. With a user-friendly interface, the Binance Web3 Wallet caters to both beginners and experienced crypto enthusiasts.

For more information, check out What Is Binance Web3 Wallet?

Trust Wallet

Trust Wallet is an open-source mobile wallet app available for iOS and Android. It supports the leading blockchain networks, including Ethereum, BSC, and many more. You also have full access to your private keys through a seed phrase. The app has some extra built-in functionalities, including purchasing crypto with a credit or debit card and a non-fungible token (NFT) wallet.

Trust Wallet has a utility and governance token, TWT. By holding the token, you can participate in decision-making, such as adding new blockchain support and integrating new tokens. You can also get discounts on the DEX and crypto purchases with TWT.

If you decide to try Trust Wallet, use our Connecting Trust Wallet to BNB Smart Chain (BSC) tutorial to get started.

MathWallet

MathWallet offers a cryptocurrency wallet browser extension, a web-based wallet, and a mobile app for iOS and Android devices. It supports almost 40 different blockchains and was one of the first to support BSC. Founded by MATH Global Foundation in 2017, the foundation has raised $12 million in a Series B funding round led by Binance Labs.

If you want to use the same wallet across multiple devices, MathWallet offers a lot of flexibility. It’s easy to move between your mobile device, browser extension, and web-based wallet, depending on your needs.

SafePal

SafePal is a hardware wallet provider that also has a decentralized mobile wallet app. Its functionality is similar to Trust Wallet with the addition of a Decentralized Finance (DeFi) section. This section has links to already popular DeFi platforms and DApps, as well as a browser. If you want to access DApps without switching apps on your device, SafePal is a suitable option for both iOS and Android. The project also has a utility token SFP used for discounts and bonuses.

SafePal S1 Hardware Wallet

The SafePal S1 hardware wallet is a more affordable option compared to a Trezor device or Ledger Nano. If you want to store your BSC tokens offline, it offers more security than any hot wallet so long as you keep your device safe. However, to use DApps, you’ll have to transfer your tokens to your SafePal hot wallet.

Closing thoughts

Having a wallet that is trustworthy and stable should be a priority for all crypto holders. The five wallets mentioned here are trusted in the blockchain community and have millions of BSC users globally. The selection is much smaller when it comes to BSC, but the key points are the same: DApp interaction, custodianship, usability, and reliability. This all depends on your user profile too.

For an active trader, a non-custodial hot wallet will be the quickest way to trade and also stay secure. DeFi farmers will appreciate the usefulness of a browser-extension wallet for greater control connecting to DApps via a desktop. If you’re just HODLing, then a simple mobile experience might be a good fit.

The BSC wallets we’ve recommended are free to use apart from the hardware option. You can make a choice depending on the level of security you need and making sure your wallet works reliably. Most importantly, if you have your private keys, keep them safe and secure.

What is passive income?

Trading or investing in projects is one way to make money in the blockchain industry. However, that typically requires detailed research and a substantial investment of time – but it still won’t guarantee a reliable source of income. 

Even the best investors can experience prolonged periods of loss, and one of the ways to survive them is to have alternative sources of income.

There are other methods than trading or investing that can help you increase your cryptocurrency holdings. These can pay ongoing income similar to earning interest, but only require some effort to set up and little or no effort to maintain.

This way, you can have several streams of income that, in combination with each other, can add up to a significant amount.

This article will go through some of the ways that you can earn a passive income with crypto.


What are the ways you can earn passive income with crypto?

Mining

Mining essentially means using computing power to secure a network to receive a reward. Although it does not require you to have cryptocurrency holdings, it is the oldest method of earning passive income in the cryptocurrency space.

In the early days of Bitcoin, mining on an everyday Central Processing Unit (CPU) was a viable solution. As the network hash rate increased, most of the miners shifted to using more powerful Graphics Processing Units (GPUs). As the competition increased even more, it has almost exclusively become the playing field of Application-Specific Integrated Circuits (ASICs) - electronics that use mining chips tailor-made for this specific purpose.

The ASIC industry is very competitive and dominated by corporations with significant resources available to deploy on research and development. By the time these chips arrive on the retail market, they are likely already outdated and would take a considerable amount of mining time to break-even.

As such, Bitcoin mining has mostly become a corporate business rather than a viable source of passive income for an average individual.

On the other hand, mining lower hash rate Proof of Work coins can still be a profitable venture for some. On these networks, using GPUs can still be viable. Mining lesser-known coins carries a higher potential reward, but comes with higher risk. The mined coins might become worthless overnight, carry little liquidity, experience a bug, or see themselves hindered by many other factors.

It is worth noting that setting up and maintaining mining equipment requires an initial investment and some technical expertise. 


Staking

Staking is essentially a less resource-intensive alternative to mining. It usually involves keeping funds in a suitable wallet and performing various network functions (such as validating transactions) to receive staking rewards. The stake (meaning the token holding) incentivizes the maintenance of the network’s security through ownership.

Staking networks use Proof of Stake as their consensus algorithm. Other versions of it exist, such as Delegated Proof of Stake or Leased Proof of Stake.

Typically, staking involves setting up a staking wallet and simply holding the coins. In some cases, the process involves adding or delegating funds to a staking pool. Some exchanges will do this for you. All you have to do is keep your tokens on the exchange and all the technical requirements will be taken care of.

Staking can be an excellent way to increase your cryptocurrency holdings with minimal effort. However, some staking projects employ tactics that artificially inflate the projected staking returns rate. It is essential to investigate token economics models as they can effectively mitigate promising staking reward projections. 

Binance Staking supports a wide variety of coins that will earn you staking rewards. Simply deposit the coins on Binance and follow the guide to get started.


Lending

Lending is a completely passive way to earn interest in your cryptocurrency holdings. There are many peer-to-peer (P2P) lending platforms that allow you to lock up your funds for a period of time to later collect interest payments. The interest rate can either be fixed (set by the platform) or set by you based on the current market rate.

Some exchanges with margin trading have this feature implemented natively on their platform.

This method is ideal for long-term holders who want to increase their holdings with little effort required. It is worth noting that locking funds in a smart contract always carries the risk of bugs.

Binance Earn offers a variety of options that let you earn interest in your holdings.

 

Running a Lightning node

The Lightning Network is a second-layer protocol that runs on top of a blockchain, such as Bitcoin. It is an off-chain micropayment network, which means that it can be used for fast transactions that aren’t immediately transferred to the underlying blockchain.

Typical transactions on the Bitcoin network are one-directional, meaning that if Alice sends a bitcoin to Bob, Bob cannot use the same payment channel to send that coin back to Alice. The Lightning Network, however, uses bidirectional channels that require the two participants to agree on the terms of the transaction beforehand.

Lightning nodes provide liquidity and increase the capacity of the Lightning Network by locking up bitcoin into payment channels. They then collect the fees of the payments running through their channels.

Running a Lightning node can be a challenge for a non-technical bitcoin holder, and the rewards heavily depend on the overall adoption of the Lightning Network.


Affiliate programs

Some crypto businesses will reward you for getting more users onto their platform. These include affiliate links, referrals, or some other discount offered to new users that are introduced to the platform by you.

If you have a larger social media following, affiliate programs can be an excellent way to earn some side income. However, to avoid spreading the word on low-quality projects, it is always worth doing some research on the services beforehand.

If you are interested in earning passive income with Binance, join the Binance Affiliate Program and get rewarded when you introduce the world to Binance!


Masternodes

In simple terms, a masternode is similar to a server but is one that runs in a decentralized network and has functionality that other nodes on the network do not.

Token projects tend to give out special privileges only to actors who have a high incentive in maintaining network stability. Masternodes typically require a sizable upfront investment and a considerable amount of technical expertise to set up.

For some masternodes, however, the requirement of token holding can be so high that it effectively makes the stake illiquid. Projects with masternodes also tend to inflate the projected return rates, so it is always essential to Do Your Own Research (DYOR) before investing in one.


Forks and airdrops

Taking advantage of a hard fork is a relatively straightforward tactic for investors. It merely requires holding the forked coins at the date of the hard fork (usually determined by block height). If there are two or more competing chains after the fork, the holder will have a token balance on each one.

Airdrops are similar to forks, in that they only require ownership of a wallet address at the time of the airdrop. Some exchanges will do airdrops for their users. Note that receiving an airdrop will never require the sharing of private keys - a condition that is a telltale sign of a scam.


Blockchain-based content creation platforms

The advent of distributed ledger technologies has enabled many new types of content platforms. These allow content creators to monetize their content in several unique ways and without the inclusion of intrusive ads.

In such a system, content creators maintain ownership of their creations and usually monetize attention in some way. This can require a lot of work initially but can provide a steady source of income once a more substantial backlog of content is ready. 


What are the risks of earning passive income with crypto?

Buying a low-quality asset: Artificially inflated or misleading return rates can lure investors into purchasing an asset that otherwise holds very little value. Some staking networks adopt a multi-token system where the rewards are paid in a second token, which creates constant sell pressure for the reward token.

User error: As the blockchain industry is still in its infancy, setting up and maintaining these sources of income requires technical expertise and an investigative mindset. For some holders, it might be best to wait until these services become more user-friendly, or only use ones that require minimal technical competence.

Lockup periods: Some lending or staking methods require you to lock up your funds for a set amount of time. This makes your holdings effectively illiquid for that time, leaving you vulnerable for any event that may negatively impact the price of your asset. 

Risk of bugs: Locking up your tokens in a staking wallet or a smart contract always carries the risk of bugs. Usually, there are multiple choices available with various degrees of quality. It is imperative to research these choices before committing to one. Open-source software might be a good starting point, as those options are at the very least audited by the community.


Closing thoughts

Ways to generate passive income in the blockchain industry are growing and gaining popularity. Blockchain businesses have also been adopting some of these methods, providing services commonly referred to as generalized mining.

As the products are getting more reliable and secure, they might soon become a valid option for a steady source of income.

TL;DR

NFTs are tokenized, collectible items valued for their uniqueness and rarity, popular on BNB Chain and Ethereum. The value of NFTs relies on their authenticity and scarcity, so it can be helpful to take a closer look at the token on a blockchain explorer.

NFTs have more use cases than just crypto art, and BNB Chain now has an innovative non-fungible token ecosystem. Due to the recent popularity of NFTs in the news and huge selling prices, it’s easy to see similarities with the 2017 ICO craze. But the two are, in fact, very different things. 

To understand more, we cover the basics of NFTs based on common misconceptions and frequently asked questions.


Introduction

When it comes to non-fungible tokens (NFTs), art and collectibles are never too far behind. These unique tokens are making waves with huge sales of graphic designers and visual artists. Artist Beeple is one of the most popular examples. His NFT called "Everydays - The First 5000 Days" was auctioned for roughly $69 million.

NFTs are hugely popular, but the topic goes much deeper than just newspaper headlines. Understanding and exploring the world of NFTs is the next step to take if you want to dig a bit deeper. There are many places to find them, use cases to look at, and even misconceptions to clear up.



What is an NFT?

An NFT is a cryptoasset representing something unique and collectible using blockchain technology. The NFT could be in demand because it has been created by a famous artist or composed by a world-class musician. The token could also be helpful in a game or wanted to complete a collection.

You may have already heard of NBA Top Shot, a digital collectible basketball card game. The cards work just like physical trading cards do, but their authenticity is guaranteed through blockchain technology. Some cards are rarer than others, and each has a different value.

Simply put, a non-fungible token cannot be faked or copied. If we look at the definition of fungibility, we can learn a bit more about what makes an NFT special:

Fungibility is an asset’s ability to be interchangeable with assets of the same type.

One bitcoin is equal and tradeable for another bitcoin. A #1/99 Keldon Johnson Holo Icon Top Shot card, on the other hand, is not interchangeable as only one exists.


What can I do with an NFT? Are they tradeable?

NFTs come in all shapes, sizes, and even use cases. Purely collectible digital art NFTs are pretty limited in what you can do with them. You can trade them, of course, but an NFT of a photo isn’t much different from a regular print in terms of utility.

Still, some NFTs have actual uses in games, like the famous CryptoKitties on the Ethereum blockchain. In this case, a collectible cat can breed to pass its traits down onto new cats.


NFTs are commonly used by financial platforms too. There is a massive market for PancakeSwap’s NFTs that are artistic and convertible into cryptocurrency. This unique combination means that people can speculate on the future price of the cashable amount. 

These NFTs all have in common the ability to trade them for different digital assets. This means you can buy or sell NFTs using ETH, BNB or other cryptocurrencies. Still, each piece of NFT is unique (i.e., they are not interchangeable).



How is the rarity and value of an NFT determined?

Determining how much an NFT is worth depends on what it represents. When it comes to crypto art, it’s quite similar to any other kind of art. We need to think about who created it, the artistic value of the piece, and how in-demand it might be from other collectors.

If an NFT is part of a limited run or series, specific numbers are often more valuable than others. We usually see #1 as desirable and other numbers people find collectible like #13 or #7. Value and rarity depend on a combination of factors, like the ones mentioned above. You can see from these Top Shot NFTs how their ranking affects the price.


For game-based NFTs, there may be financial benefits from specific NFT items or creatures. If they provide you with an extra $100 in staking rewards, then it’s going to be worth at least $100 without taking into account its artistic value.

PancakeSwap’s NFTs are slightly different. Some of their tokens can be converted into CAKE - the platform’s cryptocurrency. So if, for example, your cuddly rabbit can give you 10 CAKE and the price of CAKE is $20 (USD) per token, then your NFT is worth at least $200.



Where can I find NFTs?

If you want to explore NFTs on offer, there are a few different places to start looking. NFT marketplaces have a variety of non-fungible tokens on sale, from both famous artists and amateurs. There are loads out there to choose from, but some of the biggest are OpenSea for Ethereum-based NFTs and Treasureland or BakerySwap for BNB Chain-based NFTs.


The number of marketplaces keeps growing, and some are more specialized than others. If you are interested in buying something from a famous artist, make sure to check and see how genuine the marketplace is. You can also find NFTs by playing blockchain games or participating in decentralized finance (DeFi) projects.


What are the main NFT projects on BNB Chain?

BNB Chain benefits from a healthy NFT community on the blockchain, and it’s not all art and marketplaces either. There are NFT games and even collectibles with staking or financial benefits.

As mentioned before, BakerySwap and Treasureland are two of the largest NFT exchanges. BakerySwap also allows you to create NFTs quickly and for a reasonable price. When it comes to the art and creative side of NFTs, these are great places to start.

There are also blockchain games like Battle Pets and DeFi protocols experimenting with NFTs in more financial ways. PancakeSwap takes the number one spot for traded NFTs on Treasureland, making it a massive project for NFT usage. You can find out more info on these NFT projects by following the link.


Are NFTs the new ICO?

In short, no. While there are some slight similarities in the money NFTs raise and their recent hype and popularity, that is as far as it goes. An initial coin offering (ICO) is a method used for project fundraising by selling project tokens. It rose to popularity around 2017 and became infamous for the number of scams and failed projects taking part.

It’s easy to see why some people might get the idea that NFTs are similar to ICOs. Recently these digital collectibles have sold for millions of dollars. They are also all over the news and seen as an opportunity to make some “easy money” with crypto. These two points are where the similarities between the two end. Still, it’s crucial that you do your own research before risking your funds because not all projects are legit.



How do you verify the authenticity of an NFT?

Proving that your NFT is legitimate can be a bit tricky, depending on what you’re looking for. No doubt people are uploading other artist’s work and pretending to be them. In this case, you would have to get in touch with the artist to confirm they are selling NFTs of their work. 

An NFT’s creator should supply you with some kind of identifier for you to check. Most of the work will involve looking at your NFT on a blockchain explorer such as BscScan. When it comes to blockchain, we take a “don’t trust, verify” approach.

Helpful information could include the minting date and the wallet address that minted the NFT. You could also use the transaction history ID to see if your NFT matches up. This method is better than just checking the image or file associated with your collectible. If we look at the digital artist Beeple’s recent sale, Christie’s has given the token ID, token contract, and wallet address for validation.


There is sometimes a URL to the file or an IPFS link to verify its underlying content. Both, however, can be used by someone else when creating a fake token. In most cases, you’re best off checking with the creator first.



Closing thoughts

When it comes to NFTs, new use cases and developments are constantly coming out. It’s easy to forget that the technology is as recent as 2017 and still in its infancy. Before you start investing money into these tokens, make sure you understand precisely what you’re getting into and how to use them. It’s easy to just think of NFTs as art, but there is a whole world of projects using them in different ways.