Basic analysis of cryptocurrencies for long-term investment
The cryptocurrency world has exploded in recent years and thousands of new parts have been launched each month. However, in the middle of chaos, some investors approach basic analysis as a way to progress on the market and adopt informed investment decisions. In this article, we will explore the basics of cryptocurrency investment and provide a framework for long-term investment in cryptographic space.
What is a fundamental analysis?
The basic analysis includes an assessment of financial health and the success of the company or ownership by analyzing its fundamental measurement data, such as profits, income growth, profitability, debt level and species. Using this method, investors can recognize potential weaknesses and growth opportunities and make informed investment decisions.
Bases of cryptocurrency
Cryptocurrencies are decentralized digital assets that use cryptography for safe financial transactions. They act on a network with peers, allowing users to send and receive funds without the need for intermediaries such as banks. The most famous Cripto currency includes Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Monero (XMR).
Key foundations to consider:
- Managed and income growth
: Look at the growth rate of the company’s income, the profitability margin and the financial flow.
- Evaluation
: Determine the price and profits ratio (P / E), comparing the current course of action for its benefit by action.
- Deur level: Evaluate the debt and capital ratio of the company, indicating its loan level.
- Cash flow and liquidity : Evaluate the capacity of the company to pay the debt and maintain liquidity.
- Regulatory environment : Consider the regulatory landscape of the chosen cryptocurrency.
- Sensation of the market : Analyze the trends and feelings of the market, as a tool for analyzing feelings.
Case study: Bitcoin (BTC)
Take Bitcoin as an example of a fundamental analysis framework. In 2019, we applied this framework to assess the base of Bitcoin before its enormous price increase:
- Income growth rate: Bitcoin carried out $ 1 billion in revenues in 2020, compared to $ 4 million in 2016.
- Profitability margins: The Bitcoin profit margin was around 20%, which indicates a high profitability.
- Treasury flow: Bitcoin has maintained a positive cash flow and the benefit has exceeded the losses.
Case study: Ethereum (ETH)
Ethereum is another case study for a basic analysis:
- Income growth rate: Ethereum carried out $ 1 billion in revenues in 2020, compared to $ 100 million in 2017.
- Profitability margins: the profit of Ethereum profit was around 40%, which indicates a high profitability.
- Treasury flow: Ethereum has maintained a positive cash flow and the benefit has exceeded the losses.
Identify trends and samples
In addition to basic analysis, investors should also look for trends and models that can help them make informed investment decisions. Some usual models include:
- Analysis of trends : Identify long -term pricing trends, income growth rates or other key measurement data.
- Cycle analysis : Search for repetitive cycles in price circulation or income growth rates.
- Central reversion : Identify the potential trends that have reversed, where the weak point is expected to be a strong recovery.
Conclusion
The basic analysis of cryptocurrencies offers a precious framework for investors who wish to move with the complex and dynamic world of the cryptocurrency market. By applying this framework, investors can recognize the potential weaknesses of their selected cryptocurrencies and make informed investment decisions. Keep in mind that investment in cryptocurrency is still present significant risks, including market volatility and regulatory uncertainty.