Are you interested in cryptocurrency fundamental analysis? A quick note to you this is Part 2 of “Cryptocurrency Fundamental Analysis”. Remember to check the first part and come back here for more details about how to analyze social media and on-chain data!
Crypto Fundamental Analysis: Part 2
In Part 2, we will focus on the marketing side as well as the on-chain data of crypto analysis, including the following:
Assess Altcoin Social Media
Social media is a big thing in the crypto community. You often see “Wen pump?”, “Just HODL!”, “Paper Hands Got Rekt”, as well as tons of crypto memes on Twitter.
Don’t think social media is just about having fun. The project’s community engagement on social media determines if an altcoin project is worthy.
Why? “Diamond Hands” (investors that are holding crypto regardless of the price) are a driving force to grow a project.
DogeCoin is one example of a diamond hand community. TheDogeCoin Community members engage deeper in marketing than full-time staff by constantly creating memes and interacting with Elon Musk on Twitter.
Don’t forget to check the network’s potential growth, and the public sentiment over the project, and you can check out the following questions to access social media performance:
- Is the project popular in the community?
The total number of followers on social media and the organic growth of followers are signs of a healthy project. - What does the public think about the project?
Opinions on social media are gold, especially negative comments because they show what the public thinks about the project and how the management deals with the negative sentiment. - Are the opinions creditable?
Yeah, opinions are valuable, but don’t forget they might be paid endorsements, so-called “shilling” in crypto.
Ben Armstrong, known for his Youtube channel “BitBoy Crypto,” has admitted that he was paid more than $30,000 for a single endorsement. And some of the projects failed unfortunately, leaving his followers suffering a considerable loss.
Then what social media should you follow? These social media platforms function in different ways, so it’s better for you to follow all of them to see the project through their lens.
- Discord
This is where core team members and die-hard token fans communicate and you can find all the first-hand information here. Events happen from time to time to welcome new members and keep fans engaged. Project strategic development, suggestions, and talent recruitment can also be found here.
- Twitter
It is used as the most engaging social media platform in the crypto space. Most news updates and event information will be published here prior to other social media platforms. But be careful of fake news, remember to do a fact check! - Reddit
This famous forum is also the place to monitor public sentiment over a specific token. - Twitch
Marketing events like Tokens, NFT giveaway lottery, and live news updates are often hosted on Twitch. - Facebook and Instagram
They are for the official news updates about a project. You can check the top comments to see the overall feedback.
- Min. Commission Fee US Stocks
- US$0.0035
- Min. Commission Fee HK Stocks
- 0.015%
- Account Opening Min. Funding
- HK$10,000
Stay Updated About Altcoin Project
Investing in altcoins is similar to investing in the conventional market. You need to keep your eye on the latest updates on your investment.
Joining the Discord channel and following the official Twitter account can keep us updated on what is happening in the space.
Besides that, learning the technical terms and knowledge from the official blog (usually published on Medium or the official website) will show us the technical details of the product updates.
Don’t forget to monitor different social media channels to see how the marketing works over time.
- How often is the project updated?
- What is the quality of the marketing products?
- How diverse are the marketing materials?
- How do the followers react to the updates?
These reference questions help us assess the project’s marketing work in dynamics. A project could die off because of substandard marketing or poor public relations. Don’t get lazy checking the updates!
Study On-Chain Analysis
One benefit of crypto investing is blockchain analysis, also known as on-chain metrics analysis. It is “a crystal ball” to monitor activities on a blockchain supported by network data. Plus, it can reveal the total daily transaction value, unusual transactions, and the number of active wallet users.
There are numerous ways to conduct on-chain analysis. But what tools should be used for on-chain analysis? You may try the blockchain explorer, like ETH explorer and other on-chain data tools like Messari and Dune. They are perfect for beginners to check the basic metrics: active addresses and transaction volume; circulating supply.
Active Addresses
Active addresses are the number of addresses that have completed a transaction on a blockchain over time. In a healthy developing project, the number of active addresses should increase with time because it indicates growth in the network.
Transaction Volume
Transaction volume indicates how many tokens are circulated in a period. A high transaction value indicates a high circulation rate of a token, which means active usage of the network.
In addition, in the case of an unusual transaction of large value, that might imply the whale’s movement – an incoming big purchase or sell-off.
For example, from the data, the highest daily transaction was on May 9, 2021, and the ETH price peaked on May 10, 2022. Transaction volume may be a hint of finding a peak.
Circulating Supply
The Circulating Supply shows the total number of tokens available in the market. This important data shows how the supply changes and how it is going to affect the price of the token.
You can see this graph of Moonbeam (GLMR). The circulating supply increases because the development team is releasing the locked-up tokens as scheduled. And the increasing supply might put downward pressure if the market cannot soak up the supply.
However, this does not mean the team is “dumping” their token.
Instead, the project is in the inflationary phase that aims to keep the price low to attract more investors to jump on the bandwagon. We should combine other metrics like the development roadmap, social media sentiments, and the overall market to see the full picture.
- Minimum investment amount
- HK$0
- Annual Management Fee
- 0-0.65%
- Subscription fee of Equity fund
- 0%
【MoneySmart x Syfe Year-end Bonus Treats 💵❄️】
Successfully open account and enter the code “MS24” via MoneySmart and deposit ≥HK$10,000, can receive a HK$800 Apple Store Gift Card / HK$800 PARKnSHOP supermarket vouchers / HK$800 HKTVmall e-Vouchers!
Final Thoughts
Analyzing crypto tokens is not an easy game. However, keeping these pointers in mind will aid us in choosing potential coins that will stick around! And here are the key takeaways from all points mentioned in the entire fundamental analysis in Part 1 and Part 2.
Key Takeaways:
- Finding our niche is the first step in cryptocurrency.
- Cryptocurrency whitepaper is the basis for fundamental analysis.
- Market capitalization shows how much risk and potential a project has.
- Social media provides information about the community’s strengths.
- Legality can bar us from investing in crypto.
- Staying updated is an important follow-up after getting involved in a project.
- On-chain analysis can offer hints regarding market movement.
Investment involves risks. The information on this website is for educational purposes only and should not be construed as investment advice or recommendations. Therefore, it should not be considered as the basis for making any investment decisions or taking any investment actions.
Looking for more personal finance tips? Let’s check out MoneySmart Blog!
Homepage: www.moneysmart.hk/en