Fundamental analysis refers to the method of determining a stock or security’s fair market value. Analysts who use fundamental analysis to trade search for stocks or securities that are currently trading at higher or lower prices compared to their real value.
Understanding the term
Fundamental analysis is a method used by investors and traders in financial markets to assess the intrinsic value of an asset or business. It takes into account several qualitative and quantitative factors such as market capitalization, company management and reputation, industry health, and other economic factors.
The ultimate goal of fundamental analysis is to determine whether or not a particular asset is overvalued or undervalued. When it comes to the fundamental analysis of cryptocurrencies, they cannot be assessed in the same way as a business. This is why strong metrics need to be identified for the cryptocurrency such as the number of active addresses on a blockchain network.
Some of the other metrics used for fundamental analysis in cryptocurrencies include hash rate and the amount staked, fees paid, transaction value, transaction count, and other on-chain metrics.
Thus, to define fundamental analysis, we can describe it as a method for determining the real value of a stock or security. A stock or security is deemed to be undervalued if the fair market value is higher than its market price. In this case, fundamental analysts will give a buy recommendation.