How To Do Your Own Research In Crypto: An Evolving Checklist
There are two basic approaches to the evaluation of financial assets: fundamental analysis and technical analysis. The fundamental analysis covers the investigation of features that may affect the financial performance of the asset under consideration. Technical analysis, on the other hand, refers to examining the past price movements of the relevant asset. In recent years, sentiment analysis has been added to fundamental and technical analysis.
The sentiment analysis deals with potential investors' level of interest and mood in a particular product, service, or financial asset. Interest in monetary or technical issues such as crypto is a subject that can be interpreted positively in itself. First of all, I would like to give the main free resources that can be used in this field.
It is difficult to interpret the data produced within the scope of Sentiment analysis. It's intrinsically good that a large number of people show interest in a particular financial product. However, at the point where the interest reaches its peak, prices usually start to decline. Therefore, it is necessary to distinguish between the interest shown by people who are closely interested in crypto and the interest shown by large masses. The fact that there is a reciprocal relationship between interest/enthusiasm/fear and price is one of the factors that make the use of sentiment analysis difficult. For example, did the interest increase because of the price, or did the price increase because of the interest? Usually, both are true.
Those involved in crypto analysis highlight a particular aspect of the subject, like the blind describing the elephant. I don't think we have to choose between analysis methods. Each method has its strengths and weaknesses. Although I do not attach importance to sentiment analysis as much as fundamental analysis and technical analysis, I do not completely ignore this method.
It is not possible to cover the subject of technical analysis in this article due to its wide scope. On the other hand, price is such an important variable that it will not go unnoticed. I think two types of coins should be avoided in terms of price movements.
The first is coins whose price has increased five to ten times in a short period. There will always be whales who sell their coins to those who get on the train from the last carriage by creating parabolic price movements. As small investors, we better make their job harder by ignoring these parabolic moves.
The second is the coins that have a long history but are constantly losing value because they can not cope with development.
Beyond these two types, if we are going to make a purchase based on technical analysis, we should pay attention to the fact that our assumption is supported by more than one technical analysis school. For example, the price of the coin we are going to buy has returned from a critical resistance point and the MACD indicator is positive and the price has exceeded the 50-day average and the trading volume has increased. The more and that come together, the more likely our trade will be successful.
After briefly touching on sentiment analysis and technical analysis, we come to fundamental analysis, which is the main subject of this article. I think having a long-term perspective and being crypto-savvy are essential qualities for fundamental analysis. Crypto is indeed a vast field of knowledge. And there's no limit to learning about it as everything changes so fast.
The first thing I check about the cion or token I've heard of for the first time is the market cap rank. The larger the market value, the higher the probability that the relevant cone will be permanent. If a coin is not listed by a centralized exchange, I check how much liquidity is in the corresponding liquidity pool. High liquidity facilitates buying and selling.
Utility & use case is the most important factor that makes a coin successful in the long run. The use case is usually transferred to investors by turning it into a story. If the story is strong, the probability of success of the relevant coin increases to that extent. Since pricing is made for the future, the real competition is in writing and telling believable stories. The fact that the promises come true one by one when the time comes, increases the confidence in the story.
It is important for me that the use case is understandable because my technical knowledge of blockchains is limited. I like to experience the platform I will invest in. Using an infrastructure itself gives important clues about its value.
If a very new project is in question, having a VC investment is an important criterion for me. I follow the https://t.me/s/ico_analytic channel on Telegram to be notified of new VC investments. By the way, I like to invest in new projects emerging on Hive, because Hive is a familiar environment.
Another thing I'm checking is the CV of the leader and his team that came up with the project. Those who have done successful work in the past are highly likely to be successful in the next project. For example, Vitalik Buterin makes a significant contribution to my confidence in the future of Ethereum. He is very experienced compared to his age and he is at an age when people's mental and physical performance is at its peak. Projects led by brave, open-minded, hardworking people with good human relations are more likely to be successful.
Recently, possible airdrops have also become one of my coin purchasing criteria. For example, that's why I invested in Cosmos. In certain periods, certain categories such as meme coins, NFTs, metaverse coins, DEFI tokens become a trend. Investing in quality projects in such areas can also be an option, provided that they are caught early.
The token economy is one of the areas that I pay special attention to. If many coins are waiting somewhere blocked or if the inflation of the coin we invest in is very high, the probability of a price increase decreases.
On-chain data such as the number of users, the number of transactions, the asset managed for DEFI, the purchases and sales compared to the size of the assets owned are the auxiliary data.
Most of the projects in the crypto market is presented to our liking with a remarkable story. Evaluating the weak points of projects and the risks they may face with a critical perspective is one of the important stages of our analysis. No project is perfect, but it would be appropriate if we prefer projects with fewer flaws.
Now it's time to summarize the above-mentioned criteria.
- It would be appropriate to take our purchasing decision in the presence of a multi-dimensional evaluation, without being bound by a single idea, suggestion, or school.
- The use case of the project we will buy should be told with an interesting story.
- Coins with a higher market cap are more suitable for long-term investment. If we are going to buy a small-scale token, it is preferable if it has received a VC investment or if it is a project we know well.
- I do not recommend investing in coins with parabolic price movements and outdated coins.
- If we are going to buy according to technical analysis, we should expect many indicators to point to the buying direction at the same time.
- The fact that the leader and project members of the project have done successful works in the past will increase the chances of the project's success.
- It would be appropriate to get an idea about the vision and road map by examining the website and white paper of the project.
- I suggest using data such as sentiment analysis and on-chain data as complementary.
- Items such as possible airdrops, the category the project is included in, the number of users can be used as supporting criteria.
- Paying attention to the token economy, we should prefer coins that will have limited supply in the coming period. If we are investing in a highly inflationary coin, we must make sure that there is a reasonable reason for it.
- Critically looking at the project and identifying the flaws and risks they may face will increase the hit rate.
After making the above evaluations, it would be appropriate to recheck the coin's position in the market value ranking. Does the project deserve to be ranked higher? If our answer is yes and we have a long-term perspective means we are close to making a successful investment.
Thank you for reading.
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