The best results in trading in any market can be achieved if you use both technical and fundamental analysis. The digital currency market is no exception. However, fundamental analysis of cryptocurrencies has its own characteristics, advantages and disadvantages. I will talk about them today in this article.
The assessment of the market situation is carried out based on the study of all available information, which to one degree or another concerns cryptocurrencies. This allows not only to improve the quality of trade decisions, but also to predict the dynamics of the market in the future, as far as possible. At the same time, it must be admitted that fundamental analysis of cryptocurrencies is most effective for a period from one month to one year. First, let's look at the factors that can affect the quotes of digital currencies.
The main directions of fundamental analysis
In the process of analyzing the cryptocurrency market, I recommend paying attention to the following factors.
First of all, you need to assess the degree of demand for this or that cryptocurrency. If it is high enough, then we can expect the continued demand for a specific digital currency in the future, which is certainly important for a trader.
Next, you should pay attention to how much the cryptocurrency is in demand outside the market. Here, the attitude of the authorities of a particular country to digital currencies plays an important role. If it is loyal enough, it will help them grow. Any kind of prohibitive measures will be a negative factor for cryptocurrencies.
The next factor I would like to point out is the trust in the developers. The higher it is, the more prospects such a cryptocurrency asset has. The presence of a well-known personality among the developers is important.
And finally, it does not hurt to pay attention to the community, which, as a rule, is formed among the holders of the cryptocurrency. The larger and more active it is, the higher the chances of success for such a digital currency.
Difficulties of fundamental analysis
Fundamental analysis of cryptocurrencies is not as simple as it might seem at first glance. It has its drawbacks.
The forecast accuracy based on the analysis of fundamental factors depends on the amount of information taken into account. There is a lot of it, which complicates the analysis.
The influence of one and the same factor on the dynamics of the market can be ambiguous. In this regard, it is not always possible to calculate the possible consequences of an event.
This type of analysis in the cryptocurrency market requires some experience. Otherwise, the assessment of factors and their influence on quotes may be erroneous.
Nevertheless, if you decide to make money in cryptocurrency trading, then you will have to take time to master the fundamental analysis of this market.