What Cryptocurrency Investors Need to Know: Basic Analysis Framework

The cryptocurrency market is radically different from traditional financial instruments. Starting with Bitcoin, which is currently trading around 87.28K, this journey offers investors a complex but valuable framework: fundamental analysis. So, what is this analysis method and how is it applied in the crypto world?

Fundamental Analysis: Understanding the True Value of Assets

Fundamental analysis (FA) is a systematic approach designed to determine the intrinsic value of an asset or business. This method thoroughly examines internal and external factors to help identify assets that are considered overvalued or undervalued in the market.

The book “Security Analysis,” published in 1934 by Benjamin Graham and David Dodd, laid the foundation for this discipline. Modern investors successfully apply these principles not only in the stock market but also within the crypto ecosystem. Famous investors like Warren Buffett emphasize that evaluating the team behind a project is the most critical factor in determining its success.

Current State of the Cryptocurrency Market

Global crypto assets have increased tenfold since early 2020, surpassing $3 trillion at their peak. Currently, over 25,000 digital assets are listed on CoinMarketCap. The sector is projected to reach a market capitalization of $4.94 billion by 2030, with an annual compound growth rate (CAGR) of 12.8%.

The investor demographic is also striking: according to the NORC research center at the University of Chicago, the typical crypto investor is under 40 years old. This rapid growth of a tech-focused audience further energizes the market’s dynamic and volatile nature.

Trading Concept and Application in Crypto

In traditional terms, a trade involves the exchange of goods, services, or financial instruments between a buyer and a seller. In the crypto market, however, a trade has gained a new dimension through the rapid and global exchange of digital assets.

Concept trading is a strategy aimed at benefiting from short-term price movements. Traders who open and close positions based on news, technical signals, or market sentiment generally follow these approaches:

• Intraday trading (intraday trading)
• Swing trading (swing trading)
• Trend following (trend trading)

However, regardless of the concept, a profitable trade requires a solid combination of fundamental, technical, and sentiment analysis.

Crypto Fundamental Analysis: Differences from Traditional Finance

In stock markets, metrics like EPS (Earnings Per Share) and price-to-book ratio are commonly used. In the crypto world, the situation is different. Since the asset class is relatively new, valuation frameworks are not yet fully standardized.

However, the transparent and open data structure provided by blockchain technology gives cryptocurrencies an advantage over traditional financial tools: on-chain metrics (on-chain metrics).

Three Key Metrics Categories in Crypto FA

1. On-Chain Metrics (On-Chain Metrics)

Crypto is the first asset class where investor activity can be monitored in real-time. Every transaction is permanently recorded on the blockchain, and these data reflect real fundamentals rather than hype or speculation.

Hash Rate and Network Security

Hash rate measures the computational power of proof-of-work (PoW) networks. PoW-based cryptocurrencies like Bitcoin, Bitcoin Cash, Dogecoin, Litecoin, and Monero use a system where miners compete to solve complex mathematical puzzles.

A high hash rate:

• Indicates a more secure network
• Implies a higher cost for a 51% attack
• Signals profitable mining

A decline in hash rate suggests miners are leaving the network (miner capitulation) and that profitability is decreasing. The current Bitcoin price (87.28K), trading volume, and mining costs directly influence this balance.

Active Addresses and User Adoption

The number of unique addresses conducting (g daily, weekly, monthly) transactions indicates actual network usage. Rising active addresses generally point to increasing interest and a healthy ecosystem.

Transaction Value and Fees

High transaction value shows active circulation of digital currency. Fees reflect supply-demand dynamics. Mechanisms like Ethereum’s gas fees indicate network health and periodic demand fluctuations.

2. Project Metrics (Qualitative Factors)

Team Analysis and Past Performance

As Warren Buffett emphasizes, the experience and capacity of the team are critical. When researching, ask:

• Have team members successfully managed previous crypto projects?
• Is GitHub activity consistent and active?
• Do they have past associations with suspicious projects?

Whitepaper Quality

Bitcoin’s whitepaper published in 2008 remains one of the clearest guiding documents. Satoshi Nakamoto’s vision led to decentralized finance. A quality whitepaper should clearly present the project’s technical infrastructure, goals, and differentiators.

Competitor Analysis

When many similar projects exist, comparative analysis is essential. A seemingly attractive crypto at first glance may be less promising when evaluated against competitors.

Roadmap and Development Plan

The project’s future goals should be clear and measurable. An updated roadmap on time signals transparency and builds confidence among developers and investors.

3. Financial Metrics

Market Cap (Market Cap)

Market Cap = Current Price × Circulating Supply

This metric shows the total invested value in the network. Cryptos like Bitcoin (1.74T) and Ethereum (352B) with high market caps are generally more stable investment options. Smaller market cap projects tend to be more volatile but offer higher growth potential.

Liquidity and Trading Volume

High 24-hour trading volume indicates a healthy market. Bitcoin’s daily volume around 1.07B and Ethereum’s approximately 479M reflect the liquidity these assets can support. Low liquidity increases price volatility and makes trading more difficult.

Circulating and Max Supply

Bitcoin’s current supply is 19,967,421 (out of 21 million) BTC. The remaining 2.1 million are expected to be mined at a certain rate or schedule. However, about 3.7 million BTC have been permanently lost, as roughly 18.9 million are in circulation. Accurate estimation of lost coins provides a clearer picture of actual circulating supply.

High inflation rates (new coins entering the market rapidly) negatively impact valuation, but some projects intentionally reduce this rate. This strategic choice can make the project more attractive when demand exceeds supply.

Interaction of Fundamental Analysis and Concept Trading

Concept trading focuses on short-term opportunities. However, for a long-term and healthier investment strategy, fundamental analysis is indispensable. While technical analysis helps with entry and exit timing, fundamental analysis reveals the true value of the asset.

Many successful traders combine these two approaches:

• Use fundamental analysis to identify long-term potential
• Use technical analysis to capitalize on short-term fluctuations

Practical Tips

1. Identify projects with high growth potential: Observe market cap, user adoption, and development speed.
2. Measure network effects: Active addresses, trading volume, and whitepaper vision indicate network strength.
3. Avoid biases: Low unit price alone is not a strong investment criterion. Market cap and fundamentals should be prioritized.
4. Track historical data: Events like Bitcoin halving can radically affect supply and mining dynamics.

Conclusion

The digital economy is rapidly evolving, and new data and opportunities emerge daily. Fundamental analysis provides in-depth insights that technical analysis cannot. The ability to distinguish between the current market price and the network’s intrinsic value is essential for long-term success.

While technical analysis indicates timing, fundamental analysis points to future trends. Today, an increasing number of investors are combining these disciplines to make more rational decisions. From Bitcoin’s value around 87.28K to Ethereum’s price of 2.92K, every crypto tells a story. Those who interpret that story correctly will position themselves advantageously while most others are mistaken.