cryptocurrency: fundamental assessment: evaluate the true value of crypts
The cryptocurrency market has been known for its volatility and unpredictability. With the emergence of Bitcoin, Ethereum and other Altcoins, investors have invested millions in these digital assets with the hope of obtaining a rapid gain. However, before investing or buying cryptocurrencies, it is essential to evaluate its fundamental value. In this article, we will deepen the concept of fundamental valuation and examine how cryptocurrencies is applied.
What is the fundamental assessment?
The fundamental assessment is an analytical approach that focuses on the underlying economic foundations of a cryptocurrency, such as its market capitalization, sources of income, user base, adoption rates and technical specifications. It helps investors to understand whether the asset is undervalued or overvalued according to these fundamental metrics.
The traditional assessment method
Traditional financial markets depend largely on valuation relations, such as the ratio to profits (p/e), to determine the value of an asset. For example, if a company has a market capitalization of $ 100 billion and generates $ 10 billion in revenue, its/e ratio would be 1,000. This means that investors are willing to pay $ 1 for each dollar of profits. However, this approach may not accurately reflect the real value of an asset.
Unique characteristics of cryptocurrency
Unlike traditional assets, cryptocurrencies have unique characteristics that make them more difficult to analyze using traditional assessment methods:
* Liquidity : Cryptocurrencies have extremely high liquidity, allowing investors to buy and sell them quickly. This liquidity can lead to rapid price fluctuations, which makes it difficult to determine the value of the asset.
* Volatility : Cryptocurrency prices are notoriously volatile, with daily price changes that often exceed 10-20% in a single day. This volatility makes it difficult to forecast performance and future value.
* Limited supply : Most cryptocurrencies have a limited supply, which can cause scarcity and increase demand.
Fundamental valuation of the main cryptocurrencies
Let’s examine the fundamental assessment of some important cryptocurrencies:
* Bitcoin (BTC) : With a market capitalization of more than $ 2 billion, Bitcoin is the largest cryptocurrency. Its sources of income include transaction rates of miners and transactions volume.
+ Price ratio to profits: around 30,000
+ Market capitalization: more than $ 2 billion
* Ethereum (ETH) : As one of the most negotiated cryptocurrencies, Ethereum has a solid user base and significant income flows through transaction rates and implementation of intelligent contracts.
+ Price-market ratio: around 20,000
+ Market capitalization: more than $ 150 billion
* Litecoin (LTC)
: With a market capitalization of around $ 10 billion, Litecoin is a popular alternative to Bitcoin. Its income flows include miners transaction rates and implementation of intelligent contracts.
+ Price to profits ratio: about 1,000
Conclusion
While traditional assessment methods can provide information on the value of an asset, they may not accurately reflect the true value of cryptocurrencies. The fundamental assessment offers a more comprehensive approach when considering the underlying economic foundations of a cryptocurrency.
Investors should consider the following when evaluating the fundamental valuations:
* Market capitalization : A higher market capitalization often indicates greater liquidity and reduced volatility.
* Income flows : Cryptocurrencies with significant income flows of transaction rates, the implementation of intelligent contracts or other sources may be more valuable than those that do not have these income flows.
* User base : A solid user base can increase the demand and the price of a cryptocurrency.