When researching into any project that we may want to invest in, we should always look at the Fundamentals before we dive into any Technical Analysis. The term “Fundamental”, is defined as:
“a central or primary rule or principle on which something is based.”
To put it simply, Fundamentals are the “what”. What is the project about? What is it addressing? What is it solving?
By having a basic understanding of what a project is, we can gain an understanding of its place in the crypto space, and if it has the potential to be a project that we would potential invest.
Where to Start?
There are key aspects to structuring Fundamental research. Firstly, all projects should have a Whitepaper, that is readily accessible usually from their respective website.
A Whitepaper is the company’s report or presentation to you to help you understand what their project is and essentially how it will work, A good, reliable Whitepaper will be original, clear and concise. Always read Whitepapers with an element of critique, look for potential red flags, especially if any aspects look or sound familiar to another project.
The Whitepaper is an essential aspect of any initial research into a project, but it should certainly not end there. A sensible step to take next is to look into the team behind the project, who they are, and more importantly, how long have they been there.
Many people have been scammed in the past due to almost being lost with complicated technical jargon in a Whitepaper promising to be the greatest decentralised product of all time, quickly followed by a swift exit.
Any good project will not want to hide their team members, in fact, they would want to parade them to investors. Look into the members of the team, where were they working prior? Do they seem credible? How long have they been at this current project? Credibility and longevity are key aspects here. The longer a team and project have been around, the more confidence one would have in it going forward.
Transparency and trust are what we as investors should be looking out for. Ask yourself, do I know what I’m putting my capital into? Do I know who I am putting my capital into?
If the project seems viable and trustworthy, the next question is…what is it addressing or solving? Many crypto projects were initially “solutions looking for problems”. Whilst their use cases were good, often they were considered more of a luxury than a necessity. However, as first generation projects have matured, and come across problems, newer projects are now more valuable as they are “solutions addressing problems”. With the main issues being scalability and interoperability, any project which directly has a solution for this instantly becomes more attractive and valuable.
Once you have a good understanding of what a project is and who is behind it, we need to establish where the project is at. Look for a product roadmap, ideally one with visible updates and progress. This will give you a much clearer picture of what timeframe your investment will take to mature. If the project ticks all the boxes, but is in its infancy, it may be considered more of a longer term investment over one who has completed significant aspects of its roadmap.
Partnerships are huge. Not only do partnerships illustrate a real-life working product, but the association with household names shows that there is trust and credibility there. These often come later in a projects life, and can have a very positive impact on price. How professional and in what manner these partnerships are presented to investors should also be taken into consideration.
Before simply “buying low, and selling high”, all investors should develop a solid understanding of what they are putting their money into. As long as you have done your due diligence and researched into a company, you should feel comfortable knowing what you are investing in.