Fundamental analysis is one of the most convenient methods of estimating the real value of a bitcoin. It is the assessment of financial, economic and other important factors to identify a bitcoin’s actual worth. As a trader, you can find out whether a bitcoin is overvalued or undervalued at its present price in the market. The evaluation will always prove to be beneficial for your trading, as you can decide on that basis to purchase or sell bitcoin at the moment.
Comparisons Between Fundamental Analysis and Technical Analysis
In order to understand the concept of fundamental analysis, you need to have a clear knowledge about the technical analysis at first. It is usually psychological strategy, which is conducted to assess price and volume data. It will let you interpret the tendencies of traders and gauge the trends in the market. While, fundamental analysis crypto is about checking out the factors, which intrigue a security’s price movements to identify the true price of a bitcoin.
How to Implement Fundamental Analysis to Bitcoin?
Fundamental analysis has always been applied by traders for stocks, while it has been used for bitcoin for a decade. The analysts consider more factors while assessing bitcoins as compared to evaluating stocks. Gauging financial factors like revenue and earnings of a company are enough for fundamental analysis of the stock. But, for figuring out a bitcoin’s price, you need to put into consideration other factors like transaction volumes, user activities and others.
Factors to be Considered for Fundamental Analysis in Bitcoin Trading
As a bitcoin trader, you must be aware of the things that you need to keep in your mind during fundamental analysis. This form of analysis is generally not recommended for beginners, as they are likely to gain profits in trade, as the overall information is about price. You can hardly get more crucial information from more evaluation. But, before taking the plunge, do learn about fundamental analysis as much as you can to take the right initiatives and acquire long-term profits in bitcoin trading.
Comparisons Between Qualitative and Quantitative Factors
Fundamental analysis demands the evaluation of both qualitative and quantitative factors. To make the best decision regarding your trading, you need to be aware of a security’s real value. The analysts usually consider quantitative aspects like trading volume, but qualitative factors like bitcoin’s future scopes are used worldwide as a medium of exchange. A proper fundamental analysis of bitcoin will always bring in lifelong profits.
Information on Supply of Bitcoin
As per the reports, total supply of Bitcoin is 21 million units, of which 16.3 million bitcoins have been reserved during the time of transmission. It can be said that the supply of bitcoin is restricted and calculable. It is not like the conventional paper money, where a central bank is allowed to print as much money as they want to. During the supply of bitcoins, some of them also get lost in the midway.
Information on Demand of Bitcoin
Transaction activity and trading volume are the main factors to be considered for the demand of bitcoins. The monetary value of a bitcoin increases when it is used by people. By focussing on factors like trading volume and transaction activity, you can gauge the flow of a bitcoin. Bitcoin is gradually turning out to be one of the most widely used medium of exchanges across the world. The reasons behind this are the increment in transaction volume and the growing number of businesses, which embrace bitcoin as a payment mode. Over the recent years, a myriad of companies has accepted cryptocurrency as a payment method. Bitcoin emerged in the year 2009 and come out to be a widely used mode of payment in these few years.
As per the reports, after the inception of bitcoins, the total number of transactions in a day experienced a significant growth in the year 2012. The transaction volume is approximately 33,000 transactions per day at the time of this report. Besides the transactions, Bitcoin trading volume too accelerated. As per the reports, the digital currency trading volume in a month was less than 32k BTC per month during July 2010, which grew to 60 million BTC in October 2016.
By having a glance at the above-mentioned facts and concepts, you might have got an idea about how to find a bitcoin’s intrinsic value. The discussed information will definitely help you to make appropriate decisions regarding the purchasing and selling of the digital currency. Though, there are many people who have criticized the process of fundamental analysis for being too theoretical, but you can always integrate it with technical analysis to evaluate the actual worth of a bitcoin in the market. It is you who needs to decide which approach to implementing for finding out the present value of a bitcoin, but the fundamental analysis is any day worth a try.