Fundamental Analysis of a Blockchain Company. Be an Effective Blockchain Investor
Even though countless unique investment strategies exist, almost all of them incorporate the foundational concepts of fundamental analysis strategy. Of the three pillars of a market analysis strategy, fundamental analysis exist as an equal to technical and sentiment analysis and therefore key to any approach to investing that is considered fundamental to investor success.
Explaining fundamental analysis
Overall, fundamental analysis is made up of the many disparate, yet related elements that drive pricing in traditional markets, which include measures related to dividends and earnings, among many others. However, crypto-assets make up a market that is so new, that is nearly impossible to gather enough meaningful historical data to, in turn, make meaningful forecasts for its future. In other words, it is impossible and inadvisable to give any tokenized company any sort of trustful valuation because the entire market is in its infancy. Due to this, explaining fundamental analysis in this particular context of investment management can seem very difficult.
At the same time that this is true, several of the top financial analysts and economists are hard at work on experimental frameworks with the aim of providing trustable models to accurately measure the current market conditions and it has been exciting to monitor their work as it goes. With this, it is however, necessary to remember that even the most unique tokenized projects can be put through the same process as running a fundamental analysis on a more traditional company. For this reason, we have compiled a short list for you below with recommendations on how to invest in blockchain projects, despite the crypto space’s newness.
Fundamental analysis strategy
First and foremost, you should begin with the first three considerations below.
- Start by asking yourself: is this product offering a solution that people need? In other words: is a problem being solved with its launch?
- In relation to our initial question, a key follow-up could be: how far along is the project with its proposed solution?
- Is the team truly results oriented? Check out the project’s GitHub and see if their commits are actually meaningful to the project’s code. If you have no programming experience, ask someone who does.
Look for teams that not only prove themselves with meaningful GitHub commits and real technical results, but also with business prowess in other areas like marketing and sales. At the same time, make sure they have blockchain experience. Perhaps even more importantly, are these people working on other projects? Do they truly have the time needed to help this one succeed? With all of this, make sure people’s backgrounds match their current positions. For example, if the product manager has no coding experience whatsoever, that can be a drawback related to the project’s chances of success.
While doing any sort of research on teams, it is important to cross-reference your findings across several reputable sources. Linkedin is one of the key sources due to its reputation as the top professional social network.
In-depth blockchain teams analysis
Keep in mind that doing your due diligence of blockchain teams does not end with the questions above. Once you have verified these foundational details about the backgrounds of blockchain teams, you can move onto more narrowly focused research areas.
- Make sure that a project’s advisors have backgrounds that match up with what it aims to be.
- Run a quick industry analysis with certain key questions in mind. Ask yourself how the industry’s leaders have established their successful positions in the space, including what trends have helped them to get there.
- Next, don’t neglect how the firm’s ICO structure will be structured. Know how they plan to conduct all present and future details as well as the fact that private sale participants most likely bought tokens at discounts of up to 90% off. If nothing else, you need to be clear on this discount.
- While you’re attempting to get a firm grasp on the ICO’s structure, you can turn to its whitepaper, pitch deck, technical description, etc. All legitimate ICOs will have white papers that clearly delineate all of the terms of their upcoming offering, including their complete business plan, their token allocation, and the legal considerations that are relevant to their project, among other factors.
- Examining the legal conditions surrounding the ICO, you should also consider its legal incorporation: what legal risks are there related its host country? Particularly in countries like the USA, failure to properly operate under existing regulatory frameworks can cause an ICO to be shut down by the host government.
- No team will succeed without effective marketing, not even those with the most technical experience. In addition, ineffective marketing leads to no interest on secondary markets.
- Do not consider any ICO that fails to deliver a Minimum Viable Product before its launch.
- Remember that who the project’s partners and advisors are is very important, but verify that they actually spend time on the project, instead of just referencing it in the news without any direct involvement. At the same time, try to identify the group that represents the network’s early adopters and do the same.
- Avoid projects that promise bonuses for early participants as well as any sort of discounts for specific parties, during their ICOs. Typically, the earliest participants get some sort of benefit, but the benefit goes down on a sliding scale, which turns the process into a sort of pyramid scheme. If it seems too good to be true, it is.
- Projects which promise any profit are scams.
- Do not forget that the success of an ICO depends heavily on community-driven growth. Get involved in any way that you can, whether that is with spreading the word through content or lending your programming experience to the project itself.
- Never invest more than you can afford to lose.
- Do not sleep on the importance of verifying all of the key info on the project’s parent company. Remember that this is often a completely different entity, a different mission than the project itself. In doing so, keep in mind that Kepler Finance connects parent companies with all of the projects they have previously worked on in the blockchain space. Because of this, the days of relying on hours upon hours of individual Google searches for this type of info are gone.
- Finally, last but not least, search for the true signals in the noise. Follow the popular mantra of doing your own research above all else. We hope that with this guide, you find the path to practicing fundamental analysis in crypto and even general investment management to be much clearer.