Fundamental Analysis to Understand Cryptocurrency | Basic Knowledge Beginners Should Grasp

Price fluctuations always have reasons. Understanding the state of the global economy and the role that coins play makes it easier to see the true nature of market movements. An important approach to deciphering such background factors is Fundamental Analysis of Cryptocurrencies.

Even without specialized knowledge, grasping the basics can help you better understand market trends. In this article, we will explain step-by-step what methods fundamental analysis uses and which points to check to make more stable judgments.

Table of Contents

• [Definition and Role of Fundamental Analysis](#Definition and Role of Fundamental Analysis)
• [Differences Between Macro and Micro Factors](#Differences Between Macro and Micro Factors)
• [Three Elements to Check in Fundamental Analysis](#Three Elements to Check in Fundamental Analysis)
• [Advantages and Disadvantages of This Method](#Advantages and Disadvantages of This Method)
• [Effective Usage Methods](#Effective Usage Methods)

Definition and Role of Fundamental Analysis

Fundamental analysis is a method of systematically organizing and understanding the factors behind price fluctuations.

Cryptocurrency price movements are influenced by many elements such as news, project development progress, and the state of the global economy. By evaluating these factors comprehensively, it becomes easier to grasp the overall market trend.

This approach is not about predicting short-term price changes but about understanding medium- to long-term trends.

Understanding the Background That Markets React To

Cryptocurrencies are often said to have rapid price movements, but there are reasons behind these fluctuations. Factors such as interest rate changes, news about regulations, and the launch of new services all drive the market.

The role of fundamental analysis is to organize this “background information” and analyze the market calmly. By utilizing this method, you can establish your own judgment criteria without being swayed by temporary ups and downs, which is very helpful for long-term investment decisions.

Differences Between Macro and Micro Factors

When learning fundamental analysis, it’s helpful to classify information into two broad categories for easier understanding and judgment.

Macro Factors: The overall global economic environment

Macro factors refer to how the global economic trends influence prices. This includes interest rate levels, economic growth rates, regulatory policies, and monetary tightening.

For example, during periods of rising global interest rates, risk assets tend to see capital outflows, which can weaken buying pressure on cryptocurrencies. Such changes in the overall economic environment are macro factors.

Micro Factors: Movements of individual projects

Micro factors are specific to particular coins or projects. They include development status, user growth, strategic partnerships with companies, and major system updates.

When a project successfully implements a large-scale update, it can generate expectations that “usage may expand in the future,” which may be reflected in the price. Separating macro and micro factors helps streamline information and improves judgment accuracy.

Three Elements to Check in Fundamental Analysis

Fundamental analysis does not require covering all information. Beginners can focus on just these three key points.

1. News and Development Trends

The cryptocurrency market is heavily influenced by news. Project progress, announcements of innovative services, and partnerships with major companies are significant factors affecting prices.

Regularly checking news helps you find answers to questions like “Why did the price move at this timing?” and “What will happen in the future?”

2. Usage Trends

Whether a coin is actually being used directly impacts its intrinsic value. Indicators such as increasing user numbers, expanding transaction volume, and rising activity on the network are important signals of demand.

An increase in users can lead to higher trading volume and greater price stability. Conversely, decreasing usage tends to put downward pressure on prices. Paying attention to this point makes your judgment clearer.

3. Interest Rates and Regulatory Environment

The cryptocurrency market cannot be completely independent of the broader economic trends. Large-scale changes such as rising interest rates, tightening regulations, and economic downturns influence the entire market.

You don’t need to understand all these factors perfectly. It’s important to grasp the overall direction—whether the market environment is trending upward or downward.

Advantages and Disadvantages of This Method

Advantages: Stable Long-term Judgments

Continuing fundamental analysis makes it easier to understand the background of price movements. Tracking news, user trends, and the global economy allows you to analyze “why prices changed” objectively.

Moreover, it reduces emotional reactions to short-term price swings, enabling calmer decision-making. Since short-term price prediction is very difficult, judgments based on background information greatly improve investment reliability.

For investors aiming to build medium- to long-term strategies, having a solid judgment framework is highly advantageous.

Disadvantages: Not Suitable for Short-term Trading

The biggest challenge of fundamental analysis is that it cannot pinpoint exactly when prices will fluctuate. Even when positive news is announced, the market may not react immediately.

It is not well-suited for short-term trading, such as swing trading or day trading. Additionally, quantifying usage data or project progress can be difficult. Since qualitative assessments are involved, decision-making can become more complex.

Effective Usage Methods

Regularly Review Information

The cryptocurrency market is constantly moving. Interest rates, project news, and user activity change daily. An analysis that was accurate once may no longer be valid. Updating information at appropriate times minimizes discrepancies in your analysis.

Combine with Multiple Analytical Methods

Multiple factors influence price movements. Even if a project’s fundamentals are strong, global interest rate hikes can reduce buying pressure.

It’s important not to rely solely on fundamental analysis but to also check the latest news and technical analysis in parallel. Integrating multiple perspectives leads to a deeper understanding of the market.

Summary

Fundamental analysis is a method to systematically understand the factors driving cryptocurrency price fluctuations. By comprehensively observing elements like global economic trends, project news, and usage status, you can better grasp market trends.

Focusing on the three key points introduced in this article can reduce judgment fluctuations and enable investment decisions that are less affected by short-term volatility.

Since market conditions are always changing, regularly updating your information and combining it with news and chart analysis will lead to even more advanced understanding. Cryptocurrency fundamental analysis is a long-term learning process, but continuous effort will steadily improve your investment confidence.