How to use basic analysis in cryptocurrency investments
As the popularity of cryptocurrencies continues to grow, many investors are looking for ways to make conscious decisions when investing in digital funds. One effective approach to basic analysis is a combination of qualitative and quantitative methods to identify undervalued or incorrectly priced cryptocurrencies.
What is basic analysis?
Basic analysis includes the study of economics, technology and market trends under the cryptocurrency to understand its potential value and to make information -based investment decisions. Unlike a technical analysis focused on short -term price changes, the basic analysis looks at the long -term outlook for the encryption currency.
Key Concepts for Basic Analysis of Crying Technology
- Financial Indicators : View financial indicators such as GDP’s growth, inflation, unemployment rate and interest rates to measure general economic health.
- Industrial Trends : Analyze industrial trends, including the introduction of new technology, changes in consumer behavior and market dynamics.
- Market : Observe market opinions through research, social media and online forum to understand investors’ attitudes to cryptocurrencies.
- Regulatory Environment : Evaluate regulatory environment and updates related to encryption currency, such as state policies, laws and regulations.
- Competition : Compare the Proposal for Cryptocurrencies with its competitors on the market.
Use of basic analysis to identify undervalued or incorrectly priced cryptocurrencies
- Market value
: Calculate Cryptocurrency Market (market ceiling) to understand its size and potential growth prospects.
- Price-sensitive ratio
: Compare to its cryptocurrency with its current price with its historical price earning ratio (PE ratio) to determine whether it is undervalued or robbery.
- Dividend yield : Analyze the cryptocurrency dividend yield to assess its potential for long -term growth.
- Growth rate : Follow the speed at which the value of the cryptocurrency has increased to its historical performance.
- The risk of concentration : Evaluate the risk of concentration by comparing market value and a PE ratio or various cryptocurrencies.
Case Study: Bitcoin vs. Ethereum
For example, take, for example, two popular cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH): For example:
Market value : BTC’s market value is approximately $ 500 billion, while the ETH market value is approximately $ 200 billion.
Price ancillary ratio : BTC is traded by price alarm or about 80, compared to ETS 20.
* Dividend yield : BTC costs about 0.5%of dividend yield, while not paying dividends.
With the help of the basic analysis tools and concepts of the thesis, the investor may conclude that Ethereum has been underestimated due to its lower market value, PE ratio and dividend production compared to Bitcoin. In contrast, Bitcoin’s higher market value and price ratio may be more of a temptation option for investors looking for long-term growth.
Best Practices to Apply Basic Analysis of Crying Technology
- Complete a thorough study : Always conduct a thorough examination of cryptocurrency before making an investment decision.
- Stay up to date : Stay up to date on market trends, regulatory updates and financial indicators to make a more detailed basic analysis.
- Avoid emotional decision -making : refrain from making emotional decisions based on short -term prices or speculation.
- Your versatile portfolio : Your versatile portfolio by placing cryptocurrencies to reduce the risk of concentration.