Crypto Analysis for Beginners: Fundamental vs Technical

Understanding crypto analysis is a basic requirement for all investors. If investment decisions are based solely on feelings or recommendations, the risk of losses or falling for scams is very high.

Many incorrectly assume that crypto analysis is simply about looking at price movements, when in fact, many factors must be considered in crypto analysis. This article will serve as a guide for crypto analysis for beginners from a fundamental and technical perspective.

Brief Summary:

Fundamental crypto analysis studies the intrinsic value of a token, while technical crypto analysis uses historical data to predict price shifts.

Various tools help with crypto analysis, such as CoinGecko, TradingView, and CoinGlass.

Combine fundamental and technical crypto analysis for a comprehensive picture of a token before making a decision.

Why is Crypto Analysis Important?

The crypto market is highly volatile. A token’s price can shift drastically in a matter of hours.

This is why crypto analysis is important for predicting price movements. Crypto analysis also helps investors identify which token projects are likely to survive market volatility and which will lose value due to weak foundations.

Crypto analysis also enforces investor confidence. By thoroughly researching a project, investors can determine whether it is a worthwhile investment with long-term vision, not a hype project, or even a scam.

Fundamental Crypto Analysis

Fundamental crypto analysis utilizes all quantitative and qualitative information about a token to assess its intrinsic value.

The intrinsic value can be compared to the current market value to determine whether the token is undervalued or overvalued. If the token is undervalued, investors can buy it. If the token is overvalued, this is a signal to sell and make a profit.

Tokenomics

Tokenomics are principles that govern the creation, distribution, and management of a token. Important elements to consider include:

1. Token supply: The total number of tokens in the ecosystem.
2. Distribution: The initial number of tokens and how they are distributed to the team, investors, and community.
3. Burning mechanism: A mechanism for destroying a portion of tokens to control value.
4. Token utility: For example, tokens have real-world utility, governance functions, or are used for payments.

Developer Team

Fundamental crypto analysis examines more than just the token itself. It aims to understand the team behind it. Learn about the background of the development team through the token's website and social media platforms, such as LinkedIn.

Utility

A good token holds more than just a speculative price, but also real utility, such as:

1. Payments: Tokens such as BNB and ETH can be used to pay gas fees on their respective blockchains.
2. Access to premium services: For example, the Brave browser has BAT tokens for access to exclusive content.
3. Voting and governance: Governance tokens, such as UNI, allow holders to make decisions on platform development.
4. User rewards: For example, through staking and airdrops.
5. Participation in dApps (Decentralized Apps): Tokens with utility can be used to purchase NFTs or features in DeFi (Decentralized Finance).

Whitepaper

A whitepaper contains a token’s objectives, technology, and uses. It also explains the token’s tokenomics, including its distribution and burning mechanism, as well as future plans. Reading whitepapers is an important step in crypto analysis for beginners..

Roadmap

Another simple step in crypto analysis for beginners is to read the token project's roadmap. A roadmap explains a project’s objectives and long-term plans. Avoid projects with unclear roadmaps.

Technical Crypto Analysis

Technical crypto analysis utilizes historical price shifts to predict a token’s value and ocate buy and sell signals.

Technical crypto analysis is based on the principle that historical market data can be used to find patterns and make trading decisions. Here are some common technical analysis indicators.

Also Read: Cryptocurrency Technical Analysis: A Complete Guide to Reading the Movements of the Digital Market

Moving Average (MA)

Moving Average is the most popular technical analysis indicator. MA shows the average price of an asset over a period of time to determine buy and sell points.

Relative Strength Index (RSI)

A Relative Strength Index (RSI) is an indicator that compares recent gains and losses to evaluate an asset’s condition.

RSI shows whether an asset is overbought or oversold. Traders use this index to find entry and exit positions.

Bollinger Bands

A common indicator for measuring price volatility. Two bands are placed above and below SMA 20 (Simple Moving Average using a 20-day period). The bands widen when volatility increases and narrow when volatility decreases.

Crypto Analysis Tools

Crypto analysis doesn’t have to be conducted manually. Various tools are utilized for fundamental and technical crypto analysis.

TradingView: Market Analysis & Trading

1. Charting tools with hundreds of indicators
2. Customized scripting for backtesting strategies
3. Real-time data and alerts
4. Trading advice and insights from the community
5. Integration with various well-known crypto exchanges

Glassnode: On-chain Analysis

1. Wallet activity and transaction flow tracker
2. Exchange inflows/outflows monitoring
3. Token supply and holder distribution data
4. Customizable dashboards and alerts
5. Access to APIs for advanced data analysis

Coinglass: Risk and Derivative Analysis

1. Market interest and funding rate tracker
2. Real-time liquidation heatmap
3. Derivatives market sentiment indicators
4. Price comparisons across exchanges
5. Data for futures, options, and perpetual trading

DeFiLlama: DeFi Analysis

1. TVL (Total Value Locked) tracker across hundreds of protocols
2. Lending, yield farming, and liquidity analysis
3. Multi-blockchain support
4. Historical growth charts for DeFi projects
5. Token and protocol performance comparisons

Messari: Market Insight and Research

1. Market data with customized dashboards
2. Professional research reports for crypto projects
3. Tokenomics and governance insights
4. Latest industry news with comprehensive analysis
5. Institutional analysis and screening tools

CertiK Skynet: Security and Compliance

1. Smart contract security audits
2. Real-time risk monitoring for DeFi protocols
3. Scam detection tools
4. Security and transparency scores
5. Continuous monitoring post-audit

CoinGecko: Market Data Aggregator

1. Price, volume, and market cap tracking
2. Exchange liquidity and trading pairs
3. Developer and community activity metrics
4. Historical data and charts

Common Mistakes in Crypto Analysis

Ignoring Fundamental Analysis

Analyzing data to predict prices is important, but fundamental analysis of a crypto project is equally necessary. Through fundamental analysis, investors can determine whether a project has a realistic roadmap, a comprehensive whitepaper, and a credible team.

Overreliance on a Single Indicator

Beginner investors sometimes rely too much on data shown by a single technical analysis indicator while ignoring the broader context. Use multiple indicators in conjunction, such as Moving Average, Real-Strength Indicator, and Bollinger Bands.

Lack of Risk Management

Crypto analysis, especially technical analysis, is not always accurate. Therefore, investors must have a sound risk management strategy, such as setting stop-loss orders to minimize losses.

Chasing Trends without Confirmation

Technical crypto analysis may show bullish or bearish signals that traders immediately use to make decisions. However, it is important to wait for confirmation from supporting indicators or actual price action before trading.

Failing to Adapt

The crypto market is highly volatile, so investors must continue to adapt and learn from their mistakes.

Conclusion

Crypto analysis for beginners doesn't have to be complicated. Simply by analyzing projects from a fundamental and technical perspective, you will become a wiser investor.

A smart investor combines both fundamental and technical crypto analysis techniques to get a comprehensive picture of a token. Finally, use various tools to help with crypto analysis.