There are several things you need to take note of when buying a new coin, this form of research is what is termed Fundamental Analysis.
Fundamental analysis involves taking a deep dive into the available information about a Coin.
For instance, you might look at its use cases, the number of people using it, or the team behind the project. Your goal is to conclude whether the asset is overvalued or undervalued.
Here are highlights of Fundamental Analysis before buying a Coin
1. White Paper - A white paper is a document that outlines what a cryptocurrency is created to do and how it will achieve it.
A few things you should look out for in the white paper are:
•The Description of the Project and how it’s going to provide a solution to a real and relevant problem.
•The use case(s) it aims to cater to
•The roadmap for upgrades and new features
•The supply and distribution scheme for coins or tokens
•The Team
2.Tokenomics
Tokenomics show you the total supply of the coin, how it is distributed among the creator and the team, and how much is available in circulation. A
also if there is any information to suggest that a large number of coins has been burned or rendered unusable.
3. Initial Distribution
Another important factor to consider is how the funds were initially distributed. Was it via an ICO or IDO or Airdrops?
What percentage of tokens were set aside for the founders and the team.
4. Date of release (All-time low) - The date of release in comparison with the current price can suggest if a Coin is Overvalued at the time. For example, if a Coin released in less than 3 days has done 5x (500%) or more, then that’s a recipe for disaster.
Paying attention to the distribution should give you an idea of any risk that exists.
For instance, if the majority of the supply is owned by only a few addresses, we might conclude that this is a risky investment, as those people could eventually manipulate the market.
The Coin is moving with the pump and a few major withdrawals could send it to hell in minutes. If you got in earlier then it’s time to jump out, if you didn’t then stay away from it or wait for the Fall if you must buy-in.
5. All-time high (ATH) - This is the highest price a cryptocurrency has attained. The all-time high in comparison with the current price can tell you if you have a chance of making a profit from Holding for a little while or longer or have an increased chance of losing your money.
For example, $BNB hit $686 ATH but its current price is at $302 almost $300 less. The chances of me making a profit from here are higher.
If the Current price is the ATH then buying in at that time is just FOMO, you might need to wait a while for a retrace.
Current Price - Without being told, the current price is what you’d compare to everything else so it’s one of the most important things to look out for. For example, a lot of people won’t want to go for $BTC at $50k+, they’d rather buy a $Bake at $6 because they’d get more units.
7. Market Cap - Market Capitalization can let you predict how many more % higher the coin can go.
While you cannot accurately predict this, you can make a good guess using the MCap.
For Example, $AFEN has an MCap of just $25M, I could predict that it still has a chance of doing 5-10x from here because 10x will take the MCap to about $250M and that’s kinda realistic.
(Please note that this example is not financial advice, it’s only for educational purpose)
