Cryptocurrencies have rapidly gained popularity in recent years, and their market capitalization has grown significantly. As a result, investors and traders are continually seeking new ways to gain a competitive edge in the market. Two approaches can be used in combination to optimize research on crypto tokens: fundamental analysis and on-chain analysis.
Fundamental analysis is a method of evaluating the intrinsic value of an asset by examining its financial and economic factors. This includes parameters such as the team behind the project, the technology used, market competition, and the overall market trends. In contrast, on-chain analysis involves using the data on the blockchain to gain insights into the activity of the token’s network. This includes data such as transaction volume, active addresses, and mining difficulty. Thus, fundamental analysis provides insights into the long-term value of the asset, while on-chain analysis can help determine the short-term trends and price movements.
For instance, a thorough understanding of a project’s technology and market competition can help investors assess the long-term viability of the project. As such, fundamental analysis enables crypto users to decide whether or not they want to buy a specific crypto. Kryptview helps with this research by guiding any user to assess the intrinsic strength of a token. Once this decision is made, it can be confirmed and refined thanks to the study of on-chain metrics.
On-chain analysis of crypto
Indeed, analyzing on-chain data such as transaction volume and active addresses can provide insights into the short-term demand for the token, the ongoing movements on the blockchain, reflecting current states of the project within its ecosystem and of the market as a whole.
On-chain analysis can further be used to evaluate the health of a token’s network, such as its decentralization level, miner distribution, and transaction fees. This information can provide a clear picture of the token’s technical strength and potential for adoption, as well as evaluate the risk of market manipulation or price volatility. Finally, the proportion of holders in-the-money and out-of-money can help the user decide of when is the most favourable moment to enter.
Combining fundamental & on-chain analysis
The combination of fundamental and on-chain analyses can also help investors identify potential risks and opportunities that are hardly detectable with only one of those 2 analysis techniques. For example, if a project has strong fundamentals but shows signs of centralization on the blockchain, this could signal a potential risk for the network’s security and stability. Similarly, if a project has weak fundamentals but high on-chain activity, this could indicate a speculative bubble that may burst in the future.
In conclusion, combining fundamental and on-chain analyses is a powerful strategy that can provide a more comprehensive understanding of the potential value of a cryptocurrency and help establish optimized strategies. By evaluating the long-term and short-term trends and factors affecting the token, investors and traders can make more informed investment decisions and maximize their returns. Thanks to the recent integration of on-chain metrics from IntoTheBlock into the Kryptview decentralized crypto scoring platform, it is now possible to access all this precious information in a single place. The research is thus simplified and optimized at the same time. However, it’s important to note that this approach requires a significant amount of research and analysis, and investors must be cautious when evaluating the risks and opportunities associated with each investment.
This article was written by Alexis Prolifik, a member of the Kryptview community. He won the Kryptview x IntoTheBlock article contest, part of the many educational activities and games organized through our Crew3 quests.
Disclaimer: This is not financial advice, but the opinion of our commentator. Crypto is a risky and volatile asset. Kryptview cannot be held responsible for any decisions you make. Do your own research.
About Kryptview
Kryptview is the first decentralized crypto-scoring platform. It aims at helping crypto users share their research on tokens, by gathering insights from contributors all around the globe and having them validated by the community. Finally, Kryptview designed mechanisms to reward all contributors and validators for their work.
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