How to use the fundamental analysis in cryptocurrency investment
The popularity of cryptocurrencies continues to grow, many investors. An effective approach to fundamental analysis
** What is the fundamental analysis?
Economy, technology, technology, technology and market trends of a cryptocurrency to understand its potential unlike technical analysis, which focuses on short -term price movements, the fundamental analysis analyzes the long -term perspectives of a cryptocurrency.
Key concepts for fundamental analysis in cryptocurrency investment
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- Competition : Compare a cryptocurrency value proposal with its competitors in the market.
Use of a fundamental analysis to identify infraval cryptocurrencies or bad pricing
- Market capitalization : Calculate the market capitalization of a cryptocurrency (market capitalization) to understand its size and possible growth perspectives.
- Price / profit ratio : Compare the current price of a cryptocurrency with its historical price relationship (PE Relationship) to determine whether it is undervalued or overvalued.
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- Growth rate : Monitor the rate at which the value of a cryptocurrency has grown compared to its historical performance.
- Risk of concentration :
Case study: Bitcoin vs. Ethereum
Cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), as an example:
* Market capitalization : BTC has a market capitalization of around $ 500 billion, while ETH has a market capitalization of around $ 200 billion.
* Price / profit ratio : BTC quote a price profits of approximately 80, compared to ETH 20.
* Dividend yield : BTC pays a dividend yield of around 0.5%, while ETH does not pay any dividends.
Etherem is undervalued due to its lower market capitalization, PE relationship and dividend yield compared to Bitcoin. On the contrary, the largest market capitalization of Bitcoin and the price gain ratio could make it a more attractive investment option for investors seeking long -term growth.
The best practices to apply the fundamental analysis in cryptocurrency investment
- To carry out an exhaustive investigation
: Always carry out an exhaustive investigation into a cryptocurrency before making an investment decision.
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- Diversify your portfolio : diversify your portfolio by investing