# What is fundamental analysis in crypto? > Discover how fundamental analysis reveals the true value of cryptocurrencies by evaluating market cap, utility, and partnerships. Learn Crypto · 10 min read On this page 1. Definition 2. Understanding fundamental analysis in crypto 3. Market capitalisation 4. Community & ecosystem 5. The team & partnerships 6. Website, white paper & roadmap 7. Competition & market position 8. News, regulations & industry sentiment 9. Financial metrics: volume, liquidity & supply 10. On-chain metrics ![A velvety violet apple with a Bitcoin medallion pressed into its side](/media/2026/07/edu-what-is-fundamental-analysis-in-crypto-hero.webp?v=4d5ebcd8) **Key Takeaways** - The goal of fundamental analysis (FA) is to determine an asset’s **future value** based on whether it is **overpriced** or **undervalued** - By finding asset’s that are ‘incorrectly priced’ by the market, investors can make profitable long-term investment decisions - Fundamental analysis has been used for decades in the world of non-crypto investing - FA in crypto follows the **same principles** as in other financial markets, but takes into account different factors - Technical analysis involves using statistical trends and historical price data to identify **short-term** trading opportunities ## Definition Fundamental analysis assesses an asset’s **underlying factors** (market cap, utility, partnerships, etc.) to determine whether it is **overpriced or undervalued**, helping traders and investors make informed decisions. ## Understanding fundamental analysis in crypto The goal of fundamental analysis (FA) is to evaluate an asset’s long-term potential by assessing its **real-world use case, adoption, and broader market conditions**. FA considers various factors, including the **utility of the cryptocurrency, market cap, industry growth potential, recent news, and the team behind the project**. Unlike technical analysis, which focuses on **historical price trends**, FA provides a broader view of an asset’s potential value. ### Fundamental analysis for crypto FA has been widely used in traditional investing, where investors analyze companies based on financial performance, revenue, and management. In **crypto**, due to the lack of long-term financial data, FA relies more on factors like **project development, community support, tokenomics, and regulatory environment**. ### What are the main factors/fundamentals to consider? ### **Utility & use case** - What is the **purpose** of this cryptocurrency? - Does it solve a **real problem** or improve an existing technology? - Is there potential for **mass adoption**? A project’s success is often tied to whether **its technology or use case is relevant and in demand**. ## **Market capitalisation** Market cap provides an indication of a cryptocurrency’s **relative size and risk profile**. It is calculated by **multiplying the current price by the total circulating supply**. - **Large-cap cryptos** (e.g., BTC, ETH) are generally **less volatile** but offer slower growth. - **Mid and small-cap cryptos** may have **higher risk and potential upside**. ## **Community & ecosystem** A strong community of **developers, miners, users, and supporters** can be a positive indicator of long-term adoption. - Check **social media presence** (Twitter, Discord, Telegram, Reddit). - Look at **developer activity** on GitHub and other repositories. - Assess engagement levels—**strong communities drive adoption**. ## **The team & partnerships** - Who are the **developers, advisors, and backers**? - Do they have **a strong track record** in blockchain or related industries? - Are there **partnerships** with reputable companies, institutions, or banks? A **well-experienced and transparent team** increases confidence in a project’s success. ## **Website, white paper & roadmap** - The **website** should be professional, well-maintained, and provide transparent information. - The **white paper** should clearly explain the project’s **vision, technology, and goals**. - A **roadmap** shows the **development timeline and planned upgrades**. ## **Competition & market position** - Does the project have **a competitive advantage** over similar cryptocurrencies? - Are there **more established projects** offering the same service? - Is there a **real need for this crypto in the market**? ## **News, regulations & industry sentiment** - What are **media outlets and industry experts** saying about the project? - Are there **upcoming updates, major partnerships, or technological improvements**? - **Regulatory concerns** can affect adoption—projects should comply with local and global laws. ## **Financial metrics: volume, liquidity & supply** - **Trading volume**: Measures **market interest and liquidity**. - **Liquidity**: Ensures that traders can **buy and sell easily** without price slippage. - **Circulating vs. total supply**: Limited supply tokens (e.g., Bitcoin’s **21 million cap**) often have **scarcity-driven value appreciation**. ## **On-chain metrics** Analyzing **blockchain data** provides insights into network health and activity: - **Transaction count & value** - **Number of active addresses** - **Staking & network participation** ### **Fundamental analysis vs. technical analysis** Performing a fundamental analysis is best for identifying **long-term** investments. However, if you are looking at deepening your analysis (especially over a shorter time frame), [technical analysis](/education/what-is-technical-analysis-in-crypto/) can help. - [Technical analysis](/education/what-is-technical-analysis-in-crypto/) is for more experienced traders, and it involves using statistical trends, collected from historical price and volume data, to identify opportunities for trade. - TA uses things like (support & resistance levels, moving averages, trendlines, Relative Strength Index (RSI), etc.) to predict future price movements and evaluate the strength and weakness of an asset. - TA is concerned with **‘what’** happens to the price, rather than **‘why’** (like fundamental analysis). ### Performing a fundamental analysis FA includes an analysis of the market, the industry and the project and team itself to determine whether the market has incorrectly priced an asset. If you are new to crypto you might just want to start by looking at the use-case and market cap to get an idea of what kind of investment you are looking at before going deeper into a fundamental analysis. It’s important to note that there's **no single metric** that can give us a **full picture** of an investment. The more factors your analysis takes into account, the better. Add in some [technical analysis](/education/what-is-technical-analysis-in-crypto/) to your FA and you’ll really be ahead of the pack. Check out our [example of how to perform a fundamental analysis](/education/example-of-how-perform-a-fundamental-analysis-in-crypto/) for a look at what FA actually looks like in practice. ### What are the advantages of fundamental analysis? **Long-term investments** Unless you’re a fearless day trader, most people want to get into crypto for the long-term payoff. The industry is still in its early stages and there is a good chance that some cryptocurrencies will see a huge price increase once mainstream adoption really gets underway. FA is the key to finding cryptocurrencies that have solid fundamentals and will stand the test of time. **External factors matter** FA analyses a variety of external factors which contribute to the internal reality of the market – in crypto, things like news, project updates and even tweets can have a big impact on price. Over time, you will gain an understanding of how the crypto-sphere works and how external factors influence price action, positioning you to be a savvy trader in the long-term. **Less overwhelming than technical analysis** FA doesn’t require the same kind of knowledge and skills of technical analysis. And it’s MUCH less stressful. The [**buy and hold strategy**](/education/which-crypto-investing-strategy-is-right-for-you/) goes hand in hand with fundamental analysis, and for most investors this is the way to go. Additionally, fundamental analysis will give you a better understanding of crypto as an industry, rather than just looking at the numbers and technical indicators of TA. ### What are the disadvantages/drawbacks of fundamental analysis in crypto? **Different to other investments** [Cryptocurrencies](/education/what-is-cryptocurrency/) are a different game to other assets and markets. You can’t use the tried-and-tested lens that traditional investors use for the stock market. While this isn’t much of a disadvantage, keep in mind that if you’re new to crypto you will have to learn a new approach to FA. Thankfully, it’s not so hard to learn, and it can actually be a lot of fun. **Misleading metrics & fundamentals** Certain metrics and fundamentals can be misleading in crypto. Like any new and rapidly evolving space, there is a lot of talk and hype surrounding assets that have not yet proven themselves. Scams and misinformation are also not uncommon. For example, projects have falsely stated that they have celebrity partnerships they don’t really have, and Twitter followers can now be bought, giving false credibility to a project that is merely trying to look legit. Dig a little deeper and get a range of opinions before you make your investment decisions. **Steep learning curve** Like any artform, practice goes a long way. In order to perform an effective fundamental analysis, it helps to have a general understanding of the crypto market. You learn a lot at the start by reading, trading and making mistakes, so if you’re a beginner there is a fairly steep learning curve to be expected. That being said, crypto is far less complicated than it’s often made out to be, and once you have evaluated a few different coins and been around for a while you will be well on your way to making consistently good investment decisions. **Fundamentals can be subjective** What one person sees as a strong team and a solid community may not be what another person sees as a good basis to make an investment. Similarly, there can be a lot of disagreement over how useful a cryptocurrency is – there is a lot of **subjectivity** in FA (more than in TA), but after being in the space for some time, you’ll get the hang of what works and what doesn’t. **Fundamentals don't always translate into price action** Although FA provides quite a holistic picture of a cryptocurrency, fundamentals are not an exact science, and they don’t always translate into the actual performance of an asset. For example, a coin could have a great partnership or community but that may not actually have an effect on the price. That being said, nothing in investing is guaranteed, so fundamentals are generally still your best bet. **Long-term profits** FA requires patience. Both to perform and to wait for your investments to grow. If you’re looking for gains on a **shorter time frame**, look into technical analysis. **Vulnerable to chance factors** This is a drawback found in **every type** of investing approach, and it’s one that is especially prevalent in crypto. While fundamental analysis offers a broader view of the crypto market, it can be outweighed by anomalous, chance factors. For instance, unexpected political and economic changes, as well as things like shocking news, pandemics and regulatory changes can have a significant impact on an asset’s price, and there’s no real way to anticipate this kind of stuff. ### Which is better, fundamental analysis or technical analysis? Comparing FA and TA is like comparing apples and oranges. They are completely different tools suited for different kinds of traders. FA is great for **beginners** to the crypto-space and [**long-term investors**](/education/which-crypto-investing-strategy-is-right-for-you/), whereas TA is for the risk-tolerant and technically-inclined wanting to make profits in the **short-term.** ### Where sources of information should I use for FA? Joe wants to send Amy some [cryptocurrency](/education/what-is-cryptocurrency/). To do this, Joe takes Amy’s **public key** and encrypts the cryptocurrency, signing it with his private key (ensuring the authenticity of the transaction). Then, when Amy receives the transaction, she takes her **private key** (that is known only to her) in order to decrypt and receive the cryptocurrency from Joe. ### What are the benefits of public/private key encryption? There a variety of sources for crypto info, including official websites, reputable news outlets, whitepapers, Reddit and Telegram forums and even social media. Be sure to check out our complete guide on [how to do your own research (DYOR) in crypto.](/education/how-to-do-your-own-research-dyor-in-crypto/) ### How do I determine what is a trustworthy source of information? There’s no point spending hours researching if your sources don’t know what they’re talking about. In crypto, everyone, including those with zero authority, seem to have an opinion. It is important to **be selective** about who you listen to and who you take seriously. Things to consider when evaluating a source: - Are they well known in the industry? What does their track record say about them? (Examples of some reliable sources provided later on) - How big a following do they have? If they have a solid following, chances are their info is more likely to be sound as they have a lot to lose for spreading bad info. - Is the website you are reading a legit & established source? Sticking to the most popular news sites is a good way to make sure you are getting quality information, but even then, don’t believe EVERYTHING you read (ads are not reliable information)! - Is the person you are listening to being paid? Never assume paid advice is honest advice. Many crypto personalities are sponsored by exchanges or have stakes in projects – look for people who are upfront & honest about their own bias & opinions. - Is the person’s advice or opinion balanced? Do they give both sides of the story? Things are rarely black & white, and the best crypto sources will give **both pros & cons** about any given project. ### How does the crypto market work? Cryptocurrency markets are both extremely lucrative and volatile. Similar to traditional financial markets, the crypto markets move according to supply and demand but are also greatly influenced by the following factors: - **Press:** the way the cryptocurrency is portrayed in the media and how much coverage it is getting. - **Mainstream adoption:** the extent to which the cryptocurrency fills the market’s demands and how well it integrates into existing infrastructure such as e-commerce payment systems. - **Notable events:** major events such as technological improvements, regulatory updates, company announcements, celebrity or institutional adoption, security breaches and economic setbacks. - **Supply**: the total number of coins and the rate at which they are released. - [**Total market capitalisation:**](/education/what-is-market-cap-in-crypto/) the total value of all the coins in existence and how users perceive the coin to be developing. About the author The Digital Surge Editorial Team Our editorial team writes and reviews Digital Surge’s news, insights and crypto guides, pairing plain-English explanations with the practical experience of running an [Australian cryptocurrency exchange](/about-us/). We keep every article accurate, current and easy to act on. [Read our editorial guidelines ›](/editorial-guidelines/) Learn Crypto ## Learn crypto with confidence We provide clear, straightforward education, making it easy to understand and navigate the world of crypto. [Learn Crypto What is Blockchain? Explore blockchain technology, a secure method for storing and sending money and data without third-party interference. Read article →](/education/what-is-blockchain/)[Learn Crypto What are altcoins? Explore altcoins, the diverse cryptocurrencies beyond Bitcoin, and their significance in the digital economy. Read article →](/education/what-are-altcoins/)[Learn Crypto What are stablecoins? Explore stablecoins, hybrid cryptocurrencies linked to stable assets like USD or gold, and their impact on the financial landscape. Read article →](/education/what-are-stablecoins/) ## Get started on Digital Surge --- *Source: [What is fundamental analysis in crypto?](/education/what-is-fundamental-analysis-in-crypto/) · Last updated: 2023-07-20*