Complete Guide of Fundamental Analysis For Beginners
Complete guide of fundamental analysis for beginners
Welcome to the complete guide of fundamental analysis of cryptocurrency for beginners. In this guide, I will use the example of small capitalization coin, maybe the crypto that has capitalization around $ 10 million.
I assume you don't know what capitalization is. To make it easier, capitalization is the value of the whole crypto. For example, if the capitalization of Bitcoin at the time of this writing is $ 130 billion. So you need at least $ 130 billion if you want to buy all bitcoin exists.
Remember, the purpose of fundamental analysis is to find intrinsic value and discover the potential of coins in an industry. But with this method, we’re just focus our research on the coin that has potential to become ‘the next big thing’.
If we find coin with a small capitalization, say its capitalization is 10 million dollars. But, this coin potentially could reach 1 billion capitalization. Then, our investment could be worth 100 fold of the initial capital. It is therefore important to see crypto capitalization. Though finding a potentially 1 billion crypto is not easy. It takes time and hard work.
I know that’s already a lot of people giving method to find ‘the next big thing’, but I still can’t find the one that really comprehensive enough especially for newbie. So, I just want to share my method.
Insight from you will make this even more valuable.
Okay, let’s get started.
FIRST
If you really new into this crypto world, I will start from how to choose crypto that you want to research to.
Let’s open coinmarketcap.com. This website is just a surface. Our journey is still long way to go.
From figure 1 you can see ALL, just click on that.
And then you’ll see above picture. Next, click on Full List
Alright. Next, choose Market Cap. And then you’ll see five capitalization’s category, pick $ 10 Million - $ 100 Million.
And then, as you see in the picture above, there are two numbers :
- Number 1 means, should see the capitalization is $ 10 million - $ 100 million correctly.
- Number 2 means, you can click the Market Cap so the order will start from the smallest. That’s easier cause you don’t have to scroll down if you want to research coin from the smallest one.
Alright, so you see the picture above, the capitalization $ 10 million is at the top.
At the time of writing, the capitalization of Snovio is $ 10 million. Therefore, we will use Snovio as an example. Well, now we will enter the next stage. We have already determined which coins we will analyze based on capitalization. The next step is to analyze the coin we have selected.
Second
Snovio is just an example. There’s no intention to promote this coin. ;)
From the figure 6 above we can see the list of eight number :
- Website
- Announcement
- Explorer
- Message Board
- Chat
- Charts
- Markets
- Social
1. Official Website
Well, please click website. In doing the official website analysis, there are a couple things we need to look at.
To save time, you do not need to do too deep analysis at first.
What you should find from the website section are:
A. Team
- Does the member of the coin developer have a social media? (Yes/No)
- Is the social media active? (Yes/No)
- Does the coin developer have experiences in the field? (Yes/No)
B. Whitepaper
- Does the coin have a whitepaper? (Yes/No)
You do not have to read it first, you will find about the coin in the next section.
C. Partner
- Does the coin have partners? (Yes/No)
D. Investor
- Does the coin have any support from venture capitalists? (Yes/No)
E. Roadmap
- Does the coin have a clear roadmap? (Yes/No)
F. Design Website
- Does the official website design attractive? (Yes/No)
G. Media
- Is there any news publish? (Yes/No)
Media attention is a plus.
The better the results of the above analysis, the better the coin. Although it does not guarantee the success of the coin. If the coin you are analyzing gets a value of 9, it is most likely that the coin is qualified. But the analysis is not done yet.
2. Announcement
Well, in the announcement section, you’ll find an explanation of this coin. Therefore, you don’t need to read the whitepaper first to save the time. Once you're curious about the more technical stuff, which you can’t find in the announcement, please read the whitepaper. You decide whether to know more deeply or not, because you have done the first analysis.
Okay, back to the 'announcement' topic. Usually, this announcement is done at bitcoin.org. Well, what you need to analyze from here is the bitcoin.org community’s view of this coin. If you want to do an in-depth analysis, of course you need to sweep the comments one by one.
However, to shorten the time, you can read just a couple comments. Then you can formulate:
- Is the audience's comment on the coin positive? (Yes / No)
- Does the coin want to solve real world problems? (Yes / No)
- Is the purpose of the coin realistic enough? (Yes / No)
- Does the coin have an opportunity in the industry? (Yes / No)
The more positive the community response, the better the chances are. Although a positive response does not guarantee that the coin will be successful. We will go to the next stage. The industry that the coin enters is also important. What issue does the coin want to solve? How is the competition? The more unique and the less competition the greater the chance the coin is.
3. Explorer
The next stage is we'll see the circulation of this coin. Therefore, I don’t see the circulation in coinmarketcap.com, because the calculation problem is less precise.
Furthermore, explorer can help us, whether the circulation of this coin is monopolized by a particular group.
I will use the example of the Snovio coin.
A. Capitalization
From figure 7, we can see the actual amount of capitalization. As of this writing, capitalization at etherscan.io is different from capitalization at coinmarketcap.com.
The difference is quite large, ie 6 million dollars. Therefore, it is better to calculate directly from the official explorer website of the coin.
Capitalization has nothing to do with coin valuation. Remember, we already decided to research a certain capitalization. So, the goal of analyzing the capitalization is for calculating profit.
If the current capitalization of Snovio is 10 million dollars. Then we put the funds say $ 1000. So, if the capitalization of Snovio reaches 100 million dollars our total benefits are:
$ 1000 X 10 = $ 10 K. The number '10' is obtained from the division of 100 million with 10 million, or (current capitalization of predictions / capitalization).
B. Wallet Addresses
Well, the number of addresses represents the number of adoption of the coin. The more number of addresses the better for the development of coins.
- Is the number of the users are large? (Yes/No)
C. Token Holder
In figure 7 above, you will see Token Holder. It may be different on some explorer websites other than ERC 20. But basically, we can see the number of coin holdings, from the largest to the smallest.
- Is there any person/groups who monopolize and control the amount of coins in large quantities, which is above 50%? (Yes / No)
The fewer the monopoly (controlling in large percentages), the better the coin.
From the Snovio example above, the largest quantity coin holders have 181 million Snovio coins, with a percentage of 27% of the total coin circulation.
Explorer is important to analyze considering we need to know, how big is the actual coin capitalization, how many people have used it (through the number of wallet addresses), and how much the coin is monopolized
Message Board
Next is the message board, this section is also quite important to see how active coin developers work on their coin project.
- Do active developers provide announcements about the development of coins? (Yes / No)
The more active developers, the better the development of coins.
Message boards are important to analyze that the developer activity of a project needs to be transparent. Therefore, the more transparent developers will be about what they are doing and how much progress they are, the more quality the coin will be.
5. Chat
Now we arrive at the chat section. This section is quite important for our analysis because, this section contains about how active and how big the community of these coins.
- Are members of this coin chat group big? (Yes / No)
You can set your own, big indicator according to you. Is it over 10 thousand, or under 10 thousand. Remember, the bigger the better.
- Is this chat group active? (Yes / No)
You can see for yourself, how many chat that happened when you did not open all day. The more active the group, the better the coin.
- Is the coin developer interactive or responding to member questions in the group? (Yes / No)
The more active the developer responds, the better the coin. Response from developers is a form of their readiness to embrace and build community.
Chat is a means of our communication channel as an investor / consumer to know more about the coins we want to invest. Often we find difficult to understand the technical side of the coin, how complex the industry, the coin’s vision, and more more questions. It is necessary that we ask directly to the members of the coin developer. Therefore, their response to skeptical consumers is important.
6. Charts
Next is the charts. Charts are usually used by technical analysts. This time we'll be using it differently.
A. All Time High
All time high is useful as a guide for a minimum profit target. As well as materials evaluation.
From the example above. Snovio has ever reached all time high with the capitalization of 166 million dollars. Which is shows us, 16.6 times of current capitalization. So, 16.6 times is our minimum target.
But we need to evaluate it first, is there any negative news until they drop in such a way? If the cause of snovio goes down is because the overall crypto trend is down, there is no negative issue. Thus, the number 16.6 can be used as reference for long term Profit Target.
B. Pump and Dumb
According to wikipedia, "Pump and dump" (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price.
Well, usually, the activity is recorded in the chart, therefore, the more oftenspikes the larger the coin is being played ("fried") by the speculator.
- Are there many spikes in the coin chart? (Yes / No)
Chart shows how the performance of a coin. The chart is a psychological reflection of the market. Though the absence of speculators in the previous chart, does not guarantee the coins will not be manipulated. However, charts can be an early idea of coin performance. So we know better about the coin.
7. Market
Market or usually called exchange is a place where we can buy and sell the coin.
If your analysis of numbers 1 through 6 finds that the coins you are examining are qualified, but the exchange (market) that provides is still small. There is a possibility when the coin is entered into the new exchange price boost up. Therefore, the amount of exchange also affects the volume of transactions and capitalization.
- Is the coin already on the exchange with large transaction volume? (Yes / No)
- Is the number of pairs of coins traded large? (Yes / No)
Exchange can affect the value of a coin. Bitcoin is actively traded on various exchanges. Similarly Ethereum. Both assets become liquid and the volume of daily transactions is large. That is, when a coin into a new exchange or add a new exchange, the value of the coin can be boosted up.
8. Social Media
Sosial media juga merupakan salah satu hal yang penting. Sosial media berhubungan dengan bagaimana koin memasarkan produk mereka.
Social media is also the most important part. Social media relates to how the coin developer team market the product.
- Is the number of followers of the social media coins big? (Yes / No)
- Is the number of followers of the social media coin increasing? (Yes / No)
The more followers the coin has, can speed up the coin promotion flow. Therefore, paying attention to the social media of the coins is also important to do. Even in the end, the number of followers does not guarantee that the coin will be the winner in this crypto industry.
Note
Remember, the more deeper your research, the more qualified your findings are.
There’s no shortcut to succeed on this crypto world.
Moreover, we know that from over 1500 crypto, only 10 to 20 percent alone will actually survive the tough competition. Finding the treasure is not easy, it needs to be a struggle. Similarly find the good quality crypto.
Your insight will be helpful
Thank You
"Consistent Action Creates Consistent Results"
This is so helpful! Thank you!