Guide to Valuing Cryptocurrency: How to Value a Cryptocurrency

how to evaluate a cryptocurrency

Considering the above factors alongside the main aspects of fundamental analysis can provide a more comprehensive understanding of a cryptocurrency project’s potential and the risks involved. RSI values range from 0 to 100, with high readings (typically above 70) suggesting a possible overbought state and readings below 30 indicating an oversold condition. This tool helps investors gauge the strength of the current market movements and potentially forecast upcoming reversals.

Strategies for Managing Risk in a Crypto Portfolio [Plus Additional Tips]

Then it’s mission-critical that you’ve got the right crypto tools in your arsenal to support your investment strategy. Analyzing these metrics helps investors understand the network activity, adoption, and overall health of a cryptocurrency’s blockchain. Let’s explore the key factors to consider when conducting fundamental analysis in these distinct categories to evaluate a cryptocurrency’s prospects before investing. If a project is serious, you’ll be able to learn about the people in charge. Look at their social media profiles, search out more information online, and try to check whether these are people you can trust with your money. If the team is anonymous, or only shares first names and Twitter profiles, you’ll need to tread carefully.

how to evaluate a cryptocurrency

How to Analyze a Cryptocurrency Portfolio

The academy is a useful repository of helpful explanations on critical metrics. Moreover, this knowledge hub covers how to use Glassnode’s tools and read the charts provided. In essence, it’s a way to make Glassnode stickier to its more educated users. Or how about the Compare Coins Feature, where you can compare the price of a digital currency based on the market capitalization and fully diluted valuation (FDV) of another? This simple tool is indispensable when considering where to get the most bang for your buck. Simply clicking on “Chains” on the left-hand sidebar pulls up a pie chart and a StackArea graph displaying a TVL breakdown by chains, the latter also including a date to help you track trends.

Mutual Funds and Mutual Fund Investing – Fidelity Investments

As you may have noticed, bitcoin’s current supply is only 18.8 million while its max supply is 21 million. That means that until all 21 million coins have been mined the bitcoin supply will continue to be slightly inflationary. examples of profitability ratios As you may know, this inflation rate drops around every four years when the mining reward is halved. Known as the ‘halving’, many traders believe it has catalysed bitcoin’s historic bull runs every four years.

If a few whales control most of the coins, they will have an outsized influence on the price. If the project plans to create millions more coins, it may dilute the market and cause yours to devalue. Market cap is a much better indicator of a crypto’s worth than its price. The market cap is the number of coins in circulation multiplied by the price. A big market cap shows a coin is more established and probably more stable. We’ve found one company that’s positioned itself perfectly as a long-term picks-and-shovels solution for the broader crypto market — Bitcoin, Dogecoin, and all the others.

Ether—the Ethereum network’s token—is awarded to participants as fees for validation and processing work done. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. No matter which cryptocurrencies you invest in, here are some cybersecurity recommendations to help keep your crypto safe—note this is not a full list and is in no particular order.

  1. Inflation is the number of new coins that will be mined (created) over time.
  2. This is especially useful for investors looking to understand intrinsic market trends beyond just price movements.
  3. This credit card is not just good – it’s so exceptional that our experts use it personally.
  4. It is difficult to predict what will happen to Bitcoin in the future—it might be worth millions or nothing, depending on the circumstances.

We all know that a million random data points aren’t as helpful as a single actionable insight. And just a handful of powerful tools, integrated with a solid crypto strategy can really give you a massive edge over other crypto traders. Considering how young blockchain technology is, there are soooo many crypto tools out there. In fact, when we first compiled our list, we had roughly 15 tools listed and had to trim it down to the best ones.

These tools help define support and resistance levels, trend directions, and overall market strength, aiding traders in making informed decisions. Commonly used technical indicators include moving averages, RSI, and stochastic oscillators. Creating a website is easier than ever, so make sure the cryptocurrency you’re researching has one—an updated, informative, and clean one. Some elements to look for include token/coin objectives, team members/partnerships, and a white paper.

A crypto portfolio tracker such as the CoinStats Crypto Portfolio Tracker will help you keep track of your crypto portfolio and the entire crypto market by providing real-time market data. Market cap is one of the most popular financial metrics among traders because it shows how much money people have invested in the network. It also lets traders compare the market size of a cryptocurrency to other coins. The metrics below can help investors identify crypto projects with high growth potential and avoid personal biases in their investment decisions.