When it comes to investing or trading any cryptocurrency asset, there are different types of analysis that play a very important role in ensuring making the right investment or trading decisions in the market. Fundamental analysis is basically a type of analysis that involves an investor or trader carrying out proper research on a cryptocurrency asset and blockchain project before making any investment or trading decision.
Fundamental analysis is the act of forecasting the prices of cryptocurrencies based on fundamentals. When deciding on a cryptocurrency project to invest in, there are fundamentals to look out for… fundamentals like what the project is about, the project team, what makes the project unique, the coin or token supply,...
whether the coin or token has a max supply or not, the use cases, the benefits and features of the project, how active is the team behind the project, is the project community supportive, project concept, social reach, is the project doing something new, does the project have a working product etc. All these are core fundamentals to look out for when doing price forecasting. While fundamental analysis can be done by traders and investors, however, it is more common for investors when making long term investments decisions.
One of the talking points that surrounds the different types of analysis is which one is more important for investing or trading... for me, fundamental analysis is great when it comes to investing, however, it is not so important for a traders (most especially day traders or scalpers or short term traders) because there are a lot of cryptocurrencies (most especially meme tokens) that do not have good fundamentals that have high trading volumes and traders are making profits trading such cryptocurrencies.
A trader is mostly concerned about the technical analysis, this is because a coin can have good fundamentals but isn’t performing well in the market in terms of trading volume and price action. For trading, technical analysis is very important as it allows the trader predict the direction the market would go by looking at charts and making use of different trading strategies.
Fundamental analysis is great for long term investments where current price fluctuations isn’t a concern, rather the quality of the project and the potential of the cryptocurrency to increase in price in the long term. For traders, what matters is things like trading volume and price movements. Technical analysis is more important for traders because a cryptocurrency with good trading volume, a trader can make use of different strategies to know when to buy or sell in order to make the most profit.