cryptocurrency: fundamental assessment: determination of the true value of tokens
The world of cryptocurrencies has been on a wild trip since its inception in 2009. From Bitcoin to Ethereum, and from Altcoins to Stablecoins, the landscape constantly evolves as new players arise and the existing ones adapt to the changing conditions of the market. However, in the midst of all the emotion and speculation around these digital assets, the fundamental assessment remains a crucial aspect of investing in cryptocurrencies.
What is the fundamental assessment?
The fundamental assessment refers to the process of estimating the value of a cryptocurrency based on its underlying economic principles, commercial foundations and market analysis. Unlike technical analysis, which focuses on trends and patterns, the fundamental assessment considers all the relevant factors that can affect the price of a cryptocurrency.
Why is fundamental valuation important?
- Understand the feeling of the market : When analyzing the fundamental aspects of a cryptocurrency, investors can measure the feeling of the market, identifying the potential areas of overall or overcompra conditions.
- Identify investment opportunities : Fundamental assessment helps identify infraval cryptocurrencies with a strong growth potential, while warning against overvalued that may be due to correction.
- Protect against speculation : By understanding the underlying foundations, investors can make more informed decisions and avoid investments based on speculation that can lead to significant losses.
Key factors to consider
- Business Model : The sources of income of a cryptocurrency, profitability and scalability are crucial factors to determine its value. For example, a decentralized exchange (DEX) such as UNISWAP can be more valuable than a traditional centralized exchange.
- Market capitalization : Total market capitalization of a cryptocurrency can provide information about its possible demand and supply. A large market capitalization can indicate a strong demand for a particular token.
- Adoption rates : The adoption rate of a cryptocurrency in various industries, such as finance, games or medical care, can affect its value by providing a clear case of use for the asset.
- Regulatory environment
: Changes in regulatory environments can significantly affect the value of a cryptocurrency, either positively or negatively.
- Network effects : cryptocurrencies with strong network effects, where users are more likely to be maintained and participate in the ecosystem, tend to increase the value over time.
Examples of successful fundamental valuation
- Bitcoin : Despite its volatility, Bitcoin is often considered a stable value warehouse due to its limited supply (21 million), a generalized adoption (more than 50% of global transactions) and the strong effects of the network.
- Ethereum : As the largest smart contract platform, Ethereum’s fundamental assessment is driven by its growing ecosystem, scalability improvements and increased adoption in the defi space.
- Cardano : With a strong focus on scalability, security and adoption of the developer, Cardano’s fundamental assessment has constantly increased over time.
Challenges in the fundamental valuation
- Lack of transparency : Cryptocurrencies often lack transparent financial statements or audited accounting, which makes it difficult to evaluate their value.
- Deceptive marketing : Some cryptocurrencies are very marketed with exaggerated statements or promises that may not be backed by reality.
- Speculative markets : The cryptocurrency market is known by its speculative nature, where prices can be driven by pump analysis instead of fundamental.
Conclusion
The fundamental assessment is a crucial aspect of investing in cryptocurrencies, providing investors with a clear understanding of the underlying economic principles and the commercial foundations that generate the value of a particular asset.
