Fundamental Analysis

What Is Fundamental Analysis?

Fundamental analysis is a method of measuring a cryptocurrency’s intrinsic value by examining related economic and financial factors. Fundamental analysts study anything that can affect the value, from macroeconomic factors such as the state of the economy and industry conditions to microeconomics factors like the effectiveness of the company’s management.

If you think about it, this makes a lot of sense! Just like in your Economics class, it is supply and demand that determines price. The hard part is analyzing all the factors that affect supply and demand.

Qualitative Fundamentals to Consider:

  • The business model: What exactly does the company do? How do they really earn money? Is it just coasting on royalty and franchise fees?
  • Competitive advantage: A company’s long-term success is driven largely by its ability to maintain a competitive advantage—and keep it. When a company can achieve a competitive advantage, its shareholders can be well rewarded for decades.
  • Management: Some believe that management is the most important criterion for investing in a company. It makes sense: Even the best business model is doomed if the leaders of the company fail to properly execute the plan. While it’s hard for retail investors to meet and truly evaluate managers, you can look at the corporate website and check the resumes of the top brass and the board members.
  • Corporate Governance: Corporate governance describes the policies in place within an organization denoting the relationships and responsibilities between management, directors and stakeholders. These policies are defined and determined in the company charter and its bylaws, along with corporate laws and regulations.

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