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Understand the Role of Fundamental Analysis in Cryptocurrency Trading

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Cryptocurrency trading can seem tricky. However, professional investors use certain trading techniques such as fundamental and technical market analysis to ensure their chances of making a profit.

This article is going to take a deep dive into the fundamental analysis methods for cryptocurrency traders.

What is Fundamental Analysis?

Fundamental analysis allows the investors to establish the underlying or intrinsic value of a given investment product. For this purpose, investors examine various internal and external factors that are associated with a cryptocurrency project.

The main objective of fundamental analysis is to ascertain if a cryptocurrency is undervalued or overvalued. Fundamental analysis allows investors to enter new positions or liquidate existing ones while maintaining maximum profits.

How to Perform Fundamental Analysis for Crypto Trading?

Here are some important Fundamental Analysis indexes that cryptocurrency investors can use:

On-Chain data:

All the transaction data on a blockchain is stored on the network. Since blockchains are decentralized and permissioned anyone can access this data by running a node.

However, running a blockchain node can be time-consuming and require some technical skills. Therefore, investors can always access the on-chain data using websites or Application Programming Interface (APIs) without any hassle.

Trading Volume:

Trading volume and the popularity of a crypto project can warrant its future success. At the same time, it is also necessary to maintain a healthy amount of liquidity. It is also called transaction volume and refers to the total market value of all transactions that the blockchain has supported in a given time.

Transaction Count:

Transaction count is the total number of transactions a blockchain has processed during a given period. Anyone can track it using moving averages and track the changes in blockchain activity concerning time.

Active Addresses:

Active addresses are the number of digital wallets that the investors are using to actively trade a given cryptocurrency. This type of data can be collected from a blockchain network and it reveals the active market interest and traction for a given cryptocurrency under the existing market conditions. This metric is often read in the context of weeks, months, or daily intervals.

Transaction Fee:

The total amount of transaction fee paid is an important metric to measure the traction and interest in block space for a given cryptocurrency. Cryptocurrency investors tend to pay higher fees when traction in the market increases. It reveals the interest of the miners who are working to verify the transactions on the network.

Hash Rate and Staking:

Hash Rate is the total computational power available on a given blockchain. This metric reveals mining interest and overall network security. On the other hand, staking is used in PoS blockchains and if the staking increases it means that the network activity is also increasing.

Background Research:

Cryptocurrency investors should conduct background research on a given crypto project before they invest in it. They can survey the official White Paper, the core developers, the competitors, technical audits, etc.


Tokenomics is the survey of the distribution of the total supply of a given cryptocurrency. In this manner, the investors can understand if the cryptocurrency is subjected to market manipulation or not.


Fundamental analysis is just one aspect of cryptocurrency trading. Crypto investors should also use technical trading indicators to make the best trading decisions and refine their crypto trading strategies.


I'm a passionate full-time blogger. I love writing about startups, how they can access key resources, avoid legal mistakes, respond to questions from angel investors as well as the reality check for startups. Continue reading my articles for more insight.

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