How to perform a basic analysis of cryptocurrency
The world of cryptocurrency has grown explosively in recent years, and millions of people around the world invest their well -earned money in this digital asset class. Although many investors are drawn to high yields and rapid growth of cryptocurrencies, it is often recommended that more nuanced investment is recommended. One such approach is a fundamental analysis that includes the study of economics, market trends and technological development under the underlying currency before making an investment decision.
What is basic analysis?
Basic analysis is the process of analyzing a company or property on the basis of its natural value, financial statements, industrial trends and other relevant factors. In the context of cryptocurrency, basic analysis includes the assessment of economics and supply, mine costs, transaction fees and deployment rates under the basis of the cryptocurrency.
Basic Analysis Types
Many types of basic analyzes can be applied to cryptocurrencies:
- Price alarm (P/E) ratio : This metric compares the price of cryptocurrency to the earnings per share. A larger P/E ratio may indicate underestimation.
- Analysis of Financial Statements : Checking the cryptocurrency balance, income statement and cash flow calculation may provide information on its financial health.
- Market Value (Market ceiling) : Comparing the market roof with similar funds with similar funds can help to assess its relative size and growth potential.
- Acceptance Analysis : Assessment of the adoption rate of cryptocurrency, including the involvement of institutional investors, retailers and other stakeholders, may provide information on its scalability and availability.
- Regulatory analysis : Investigation of regulatory development, such as government robbery or new regulations, may affect the feelings and prices of the market.
How to perform a basic analysis of cryptocurrency
To perform the basic analyzes of the encryption currency follow these steps:
- Examine the cryptocurrency : Learn how the underlying economy, technological development and market development.
- Check the financial statements : Analyze the cryptocurrency balance, income statement and cash flow statement to assess its financial health.
- Evaluate Market value : Compare the cryptocurrency market ceiling to evaluate similar funds to assess its relative size and growth potential.
- Evaluate the degree of adoption : Evaluate the degree of adoption of cryptocurrency, including the participation of institutional investors and retailers.
- Consider regulation development : Investigate the regulatory development of cryptocurrency and their potential impact on market feelings and prices.
Example analysis
Let’s look at example analysis of Bitcoin (BTC):
* Price alarm (p/e) ratio : BTC trades in P/E ratio 20, indicating underestimation.
* Financial Statement Analysis
: Checking the Bitcoin balance sheet, income statement and cash flow calculation reveals a significant increase in well costs over the last year, which may affect profitability.
* Market value (market ceiling) Analysis : Comparing BTC with similar assets reveals that its market ceiling is about $ 50 billion, while many other cryptocurrency have a lower market ceiling.
* Acceptance analysis : Bitcoin’s adoption assessment reveals the high participation of institutional investors and retailers, indicating strong demand for cryptocurrency.
* Regulatory analysis : Reviewing regulatory development associated with cryptocurrency demonstrates continuous efforts to regulate them.