Understanding Cryptocurrency Fundamentals: A Comprehensive Guide for Beginners in the Crypto World
With the ever-growing popularity of cryptocurrency, many newcomers with backgrounds in traditional finance (tradfi) such as stocks, bonds, or mutual funds often find themselves puzzled about how to analyze the fundamentals of crypto assets. Frequently, there's a prevailing skepticism that "crypto lacks fundamentals."
However, this assumption is not entirely accurate. In reality, there are numerous Altcoin projects in the crypto market that demonstrate real-world utility or have proven successful through their business models, consistently generating profits over time. To grasp the fundamentals of cryptocurrency, beginners can follow several steps.
1. Utilize Token Terminal
One effective method to understand cryptocurrency fundamentals is by utilizing tools like Token Terminal. Token Terminal is a free platform commonly used in Margin Call episodes. This tool provides crucial information related to the performance of a crypto asset, including:
- Total Value Locked (TVL): The total value of assets held by a specific protocol or application.
- Daily Active User (DAU): The number of daily active users utilizing a particular crypto platform.
- Fees: The charges imposed by the platform or protocol on users.
- Cost: The operational expenses incurred by the crypto project to run its operations.
- Earnings: The income received by the project owner from various sources, such as transaction fees or staking.
- Revenue: The total income generated by the project from all sources.
By using Token Terminal, beginners can gain a better insight into the financial health of a crypto project. However, it's crucial to remember that users should always conduct their own research and not solely rely on specific analytical tools.
2. Evaluate Real-World Use and Business Model
It's essential for beginners not only to focus on the current market price but also to understand whether a crypto asset has real-world use or a proven business model. Projects with real use cases tend to be more stable and have the potential for long-term growth.
The best way to evaluate this is by reading the project's whitepaper and understanding how the underlying blockchain technology can add value to users. Additionally, examining the business performance history of the project and whether they have successfully generated profits from their endorsed business model can provide a more comprehensive picture.
3. Conduct Independent Research
While analytical tools like Token Terminal can offer valuable information, it's crucial to always conduct independent research. Beginners should learn to read price charts, identify market trends, and understand the fundamental factors that can influence the price of a crypto asset.
Independent research also involves staying updated on the latest news and developments in the cryptocurrency world. Important news and announcements can significantly impact the value of an asset; therefore, beginners need to stay informed.
Conclusion
Analyzing the fundamentals of cryptocurrency is not as complex as many beginners might imagine. By using the right analytical tools, such as Token Terminal, and conducting independent research, beginners can gain a better understanding of the financial health of a crypto project. It's important to remember that the crypto market can experience significant fluctuations; hence, beginners need to have a strong understanding of fundamental factors and make investment decisions based on comprehensive information.
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