Sep 28, · The nature of blockchain based digital currencies such as Bitcoin means that they may be particularly amenable to fundamental analysis. This is because the range and reliability of fundamental economic data available for analysts to use is greater in many areas for Bitcoin than for a regular fiat currency. Fundamental Analysis And Bitcoin Traders and investors have been applying fundamental analysis techniques to the stock market for decades. Bitcoin, when compared to traditional securities, however, is highly volatile, so the nascent digital currency market requires a slightly different approach when integrating fundamental analysis methodologies. Jul 29, · Best Bitcoin Trading Platforms. The first step to get started trading bitcoin is choosing a reliable platform. When starting out with bitcoin trading, .
Fundamental trading bitcoinBitcoin Investment Trading Fundamental Analysis – Tools Guide?
The total number of Bitcoin transactions that have occurred since the creation of the currency has demonstrated an upward trend, with a dramatic spike in frequency occurring at the beginning of The average daily transaction total of Bitcoin currently sits at around 33,, and is growing rapidly.
The trading volume of Bitcoin follows a similar trajectory. By the end of October , the trading volume of the currency had reached nearly 60 million BTC. As with any security, global economic events can exert a powerful influence on Bitcoin prices. Events that affect the price of Bitcoin can be both related and unrelated to the currency, but both can have a profound impact. A highly-publicized and important crypto-related event such as the halving, which affected the subsidy the Bitcoin network uses to compensate miners , has a clear and easily recognizable impact on the future supply rate of the currency.
Events that appear unrelated to Bitcoin can also have a significant impact on its price. Historically, Bitcoin prices have surged in response to events that presented clearly defined global economic strife. The ongoing financial and economic challenges in Greece, for example, have been attributed to the rising price of Bitcoin. Leveraging the insights delivered by fundamental analysis can provide Bitcoin traders and investors with a deeper understanding of the intrinsic price of the currency, which ultimately assists in making more informed and profitable trading decisions.
Opponents of fundamental analysis commonly criticize the technique for its speculative and theoretical nature, as it is primarily concerned with the hypothetical worth of a security rather than its actual value at any given point in time. Technical analysis can be used at this point to identify a profitable exit point.
Technical analysis can also be used to assess the recent volume and price data of Bitcoin to calculate the best time to buy, which can then be balanced with a fundamental analysis to confirm the buying decision. Ultimately, each trader must decide which techniques to incorporate into their trading strategy autonomously. One fact remains true for any trading strategy, however- in the world of digital currency , knowledge is power, so the more you know about Bitcoin, the more successful your investment strategy will be.
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Stay tuned. E-mail is already registered on the site. Please use the Login form or enter another. You entered an incorrect username or password. Fundamental Analysis vs. Fundamental Analysis And Bitcoin Traders and investors have been applying fundamental analysis techniques to the stock market for decades.
Key Factors To Consider Before incorporating fundamental analysis into your digital currency investment strategy, there are a number of key considerations that should be contemplated. Quantitative vs. Qualitative Factors The first step of incorporating fundamental analysis methodology into any investment strategy is to understand that the approach involves both qualitative and quantitative factors. That is also true here, although the mechanics are somewhat different.
When analyzing a digital currency with a public blockchain you can see exactly how many transactions have taken are taking place, how large they are and how they are distributed. This gives offers wealth of information which is not available in traditional currency markets. Number of transactions : The number of transactions which have occurred over a given period of time, usually one day, is a gross measure of economic activity.
Volume of transactions : The number of coins transacted during a 24 hour period gives additional information about the amount of economic activity. Various services also have charts for volume measured in various fiat currencies, as well as offering separate charts for exchange volume.
Number of transactions excluding popular addresses : Popular addresses are associated with exchanges and other large businesses using BTC. By excluding them an analyst may get a better idea of how active regular network users are in a given period of time. Perhaps the most important factor driving the value of BTC, other than speculation of course, is the number of users and how active those users are. Of course you can already get some idea of this by looking at the number and size of transactions, but digging deeper into the data can give you a much clearer picture.
Here are some of the most important metrics to take into consideration:. Number of Unique Addresses Used Per day : Looking at the number of addresses which hold a balance of coins, or the total number of addresses that have been used, does not tell you much because many Bitcoiners will use more than one address.
But by looking at the number of unique addresses which have been used in a particular day you can get a solid picture of changes in network use and therefore whether adoption rates are rising or falling. This stat is a combined measure of how many users there are and how active those users are. Days Destroyed : This is a unique metric invented specifically for Bitcoin, which can be notoriously difficult to interpret.
It can be used to give an indication of both the velocity of money and of user adoption. The purpose behind creating this metric was to give a clearer picture of genuine economic activity than you would get from raw data on the number or volume of transactions. It is also used to measure the extent to which users are either hoarding or spending coins — a high figure for days destroyed means that coins are moving from savings into active circulation, whilst a fall would indicate that older coins are not being spent, many of which are likely to have been taken out of active circulation and left in longer term savings wallets.
Spending may be said to be positive in the longer term as an indication of the growth in utility of the network and the health of the Bitcoin economy, but may drive down the price in the short term as many businesses sell instantly for fiat.
On the other hand hoarding reduces the supply of coins on the market and can drive up price in the short term, but may be seen by some as a negative indicator of genuine user adoption. To complicate the picture, hoarding may also indicate that users anticipate future price rises. Ratio of Trade Volume to Transaction Volume : Bitcoin has always been popular among speculators and investors, so the question always arises: to what extent is the volume of transactions being driven by traders and to what extent is it being driven by regular users.
Days destroyed cannot tell you this as it may include coins being transferred from savings wallets to exchanges.
The number of unique addresses can give you some idea, but once again it may include an uptick in activity among traders as they move money between different accounts.
Please conduct your own thorough research before investing in any cryptocurrency. Laying the foundation While investors use fundamental analysis to evaluate different asset classes, such as equities and fiat currencies, several analysts assert that using this approach to evaluate bitcoin is more complex.
Key role of demand Several variables affect bitcoin demand, including user adoption, transaction activity and trading. Chart analysis image via Shutterstock Disclaimer: This article should not be taken as, and is not intended to provide, investment advice.
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