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cryptocurrency fundamentals

The Impact of Crypto Fundamentals on Long-Term Valuations

An increasing number of people are being attracted by the cryptocurrency market and because of the high volatility, they simply look at prices to find opportunities. For someone interested to buy crypto in the short run, that could turn out to be efficient. However, leaving cryptocurrency fundamentals aside will be like walking on the street with eyes folded. To make our readers motivated to study this area of the cryptocurrency market, we want to share some interesting information on why will it matter to have a well-consolidated understanding from a fundamental point of view.

Speculative nature in the short run

Cryptocurrencies continue to be highly-speculative assets and their prices are doomed for boom-and-bust cycles. Since Bitcoin came to life in 2008, we’ve had two major cycles, but despite that, the global market cap is bigger as it was a few years ago. This cyclicality did not lead to all large-cap cryptocurrencies dropping to new all-time lows, which means some investors had been piling in on crypto-based on other factors. Since the price wasn’t the only reason to buy cryptocurrencies, we can assume that several fundamental factors had been critical in driving flows in several important tokens.

Generating inflows

Blockchain developments, performance improvements, halvings, software updates, and others can dramatically change the face of any given cryptocurrency. It does not matter whether we talk about Bitcoin, Ether, Litecoin, Tezos, or others; the bottom line is that any change in how the infrastructure works can have a meaningful impact on the token price.

At the end of the day, all that matters is to generate inflows in the long run and unfortunately, few cryptocurrency projects manage to create and maintain a high level of trust among investors. The market sentiment is sensitive to any unexpected event and the price can overextend both on the upside or the downside. That’s a variable that makes investing based on fundamentals a difficult job, which is why the popularity of cryptocurrencies doesn’t even compare to stocks or ETFs.

High daily transactions volume

An increased daily transaction volume could be suggestive of high liquidity for any given cryptocurrency. Not surprisingly, all the large-cap tokens are leading in terms of volumes as well. Although it could be debatable whether those volumes are real (due to wash trading practices), combined with the liquidity in crypto derivatives, this is another fundamental factor that could be an indicator for the long-term performance of a token’s price.

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