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An Introduction to Fundamental Analysis

DYOR explained

Kevin

67 posts

User

2022/02/16 13:30:46



Preface

What is fundamental analysis?

Step 1: Use Case

Step 2: Financial metrics

Step 3: Blockchain

Step 4: Project metrics

Step 5: Hype

Step 6: Tokenomics

Closing chapter



Preface
This fundamental analysis is both for crypto traders who wish to analyze a coin/token, and for those who wish to use our smart filters to scout for new ones whilst performing a fundamental analysis in the process.
CoinScouts users can perform fundamental analysis quickly and easily with our search filters. You'll be able to identify the cryptocurrency projects that match your needs in just a few clicks. Nevertheless, if you're a newcomer to cryptocurrencies, you might not be familiar with the various categories you might sort your results by. In order to assist you, we've created this comprehensive overview of fundamental analysis principles and techniques. This course relies heavily on our website's search filters since they provide a clear path for performing a step-by-step fundamental analysis.



What is fundamental analysis?
First, let’s start by explaining what we mean by fundamental analysis (FA). Investors use it to figure out how much an asset or business is worth. It's their job to figure out if an asset or business is overvalued or undervalued.



You may be wondering then how this differs from technical analysis, a commonly used analysis in the crypto world. Simplified, fundamental analysis tells investors which coin or token to invest in using different metrics to estimate the real value of a project. Technical analysis tells investors when to invest in the project. They do this by predicting future price movements based on historic ones. We’ll focus more on technical analysis in our next course!



So what metrics can we use for a crypto project to estimate its value? For a blockchain we can perform on-chain metrics to examine the blockchain’s transaction count, transaction value, and number of active addresses, among others. For blockchains and decentralized applications (dApps) built on these blockchains, we can also use financial and project metrics. We’ll cover each of these metrics in our course. But we’ll start our course by taking a step back and looking at a project’s use case. In short, how does it try to create value?



Step 1: Use Case
We are seeing more and more ways to utilize blockchain technology every day. If you go to our website, you'll see that we’ve identified 13 main categories, with a total of 97 subcategories. On our homepage, we give short summaries of each use case (both the parent categories and their subcategories).



So, how can you tell if a project has a strong use case? Each application has its own set of cryptocurrency projects, and each of those with its own set of target audiences and potential growth. Obviously, a DeFi lending/borrowing project is not the same as a Play to Earn RPG game!
When reviewing a project's use case, it is critical to ask insightful questions such as:
Is it a completely novel use of blockchain technology or has it already been adopted by a large number of other crypto projects?
Is it solving a big problem?
Can it lead to mainstream adoption?
Conversely, does it cater to a profitable niche target audience?
What are some obvious obstacles to the adoption of this use case?



The answers to these questions will elicit various responses. As such, there is no one use case in which every crypto investor should put their money to work. The key is to find a crypto project that has a use case you can get excited about. It also helps when you're familiar with the problem the use case is trying to solve.
Something equally important to consider is how much risk the investor is willing to take. Risk-averse investors may opt for crypto projects that utilize popular use cases, such as DeFi and NFTs. On our website, we’ve ranked use cases by adoption among developers. In other words, the more crypto projects share a common use case, the higher the use case will rank on our use case list. These markets, however, are already relatively saturated because there are a lot of competing crypto projects. Therefore, the potential for growth may also be limited.
Conversely, investors willing to gamble may find a good match in use cases that haven't received a lot of attention and adoption yet and are led by a few pioneering projects. Those who specialize in finding use cases that have the potential to blow up can, undoubtedly, benefit greatly from this.
For those betting on lesser-known use cases, it's a good idea to read as much crypto-related news as possible in order to spot future crypto trends. For your convenience, CoinScouts compiles all of the relevant news onto a single page. This way, you only need to spend 5 minutes per day staying up to date and scouting for new emerging use cases! We've even created a thread in our forum (see: The Next Blockchain Use Case(s) to Explode) for CoinScouters to debate and share insights about the next potential use case hypes.
We also provide our visitors with various hype indicators. Simply go to our homepage and look at the upper bar. When deciding on a use case, the middle metric "Category trends" may be of interest to you (see Figure 1). Every day, we highlight the subcategory with the greatest 24-hour increase in trading volumes. In other words, it shows off a popular use case at a given moment. Keep in mind that this momentum is only temporary and does not necessarily predict future hype for the use case.




Figure 1: Category trends



To summarize, there are already many blockchain-based use cases, and new ones are constantly being developed. A use case must correspond to an investor’s various preferences. You can join the crowd and go for the most common ones, or you can make educated guesses about future trends and focus on use cases that have not yet seen widespread adoption. To identify upcoming crypto trends it helps to read the news, visit our forum, and to keep an eye on our hype indicators found on the website.



Step 2: Financial metrics
The most critical financial metrics are as follows:
1. Market capitalization
2. Fully diluted market capitalization
3. Circulating supply
4. Volatility
5. Volume



We will analyze each of these metrics one by one. You can skip this chapter if you’re already familiar with them. We do wish to share that you can find and filter EACH of these metrics on CoinScouts.io. Also note that these metrics are still missing if the token is not listed yet. Still, from a crypto project’s tokenomics, you can derive its initial (fully diluted) market cap based on the initial circulating supply and the listing price.




  1. Market capitalization
    Inexperienced traders sometimes make the mistake of focusing solely on the token's price.
    They believe a $0.01 token is a better deal than a $10 token. This is not necessarily the case.
    Investors more commonly use market cap to compare value across cryptocurrencies. Essentially, it represents the cost of buying all available crypto units (assuming no slippage). The market cap is therefore calculated as circulating supply x current price.
    We’ll show you how to use this market cap to compare the value of two different crypto projects.
    Project 1: a cryptocurrency with 100,000,000 coins in circulation at $0.01 each has a market cap of $1,000,000.
    Project 2: a cryptocurrency with 5,000 coins in circulation at $10 each has a market cap of $50,000.



As you can see, the cryptocurrency with a lower price per coin actually has a higher market cap due to the fact that more tokens are in circulation! Project 1 has, ceteris paribus, less potential for growth, despite the fact that its coins are “cheaper”.
Market capitalization is frequently used for growth potential, but also to assess volatility. A cryptocurrency with a larger market cap is more likely to be a more stable investment. Smaller market cap digital currencies are more susceptible to market whims, and can see huge gains or losses.



On CoinScouts, Cryptocurrencies are classified by their market cap into four categories:

Figure 2: CoinScouts.io market cap categories



Large-cap cryptocurrencies, such as Bitcoin and Ethereum, have a market cap of more than $1 billion. Investors consider them to be lower risk investments because they have a proven track record of growth and often have higher liquidity — that is, they can withstand a higher volume of people cashing out without negatively impacting the price.
Mid-cap cryptocurrencies have market caps ranging from $250 million to $1 billion; they are generally thought to have more untapped potential upside but also higher risk.
Low-cap cryptocurrencies have a market cap of $50 million to $250 million and are even more vulnerable to dramatic swings based on market sentiment.
Degen-cap cryptocurrencies have a market cap of less than $50 million and are extremely volatile. These cryptocurrencies have yet to show signs of growth and have very little liquidity. Still, many investors hunt for hidden degen-cap gems, as they have the potential to "go x100".




  1. Fully diluted market capitalization
    Fully diluted market capitalization is defined as the total value of the cryptocurrency at today's price if the entire future supply of coins were in circulation.



So in the case of Bitcoin:
Market cap = 18.8 million (circulating supply) x current price of 1 BTC
Fully diluted market cap = 21 million (max supply) x current price of 1 BTC
Fully diluted market cap is used together with market cap to rank the popularity of crypto projects. However, the metric should be used together with others. After all, a new coin's fully diluted value could be inflated by opting for a large max supply. One can wonder if other investors or traders would also be interested in spending the same price for the remaining tokens. Releasing all tokens for circulation will most likely increase inflationary pressure on the price of the coin.



On CoinScouts, traders can also filter crypto projects on fully diluted market caps (see Figure 3 below).




Figure 3: CoinScouts.io fully diluted market cap categories




  1. Circulating supply
    We mentioned that you need the circulating supply to calculate a coin’s market capitalization. But what exactly is a coin’s circulating supply?
    Circulating supply definition:
    The number of cryptocurrency coins or tokens that are publicly available and circulating in the market.



Again, traders use this to calculate a token's market cap. However, knowing the circulating supply and the maximum supply allows you to calculate how many more coins will be released for circulation, which can cause a coin's price to fall. As a result, traders prefer a higher percentage of tokens in circulation. CoinScouts.io is the only crypto directory that enables crypto traders to use this metric as a filter (see Figure 4). Make good use of it!
A cryptocurrency’s circulating supply can fluctuate over time. For example, until the maximum supply of 21 million coins is reached, the circulating supply of Bitcoin will gradually increase. Burn events, on the other hand, cause a decrease in the circulating supply, removing coins from the market permanently.
It’s important to note that the exact number of units in circulation for a particular cryptocurrency or token is impossible to determine. Coins can be burned, keys lost, or funds simply forgotten. As such, the number of tokens in circulation is always an approximation.




Figure 4: CoinScouts.io % of token in circulation filter




  1. Volatility
    Volatility is a measure of how much the price of a specific asset has increased or decreased over time. Investment in an asset with a high degree of volatility is considered riskier than an asset that is more stable and predictable since it has a greater potential for either greater returns or greater losses over a shorter period of time.
    There is a perception that cryptocurrency is an extremely volatile asset class, with the potential for huge ups and downs in short periods of time. There are, however, varying degrees of volatility in the cryptocurrency market as well. "Degen-caps" are regarded to be more volatile than high-caps such as Bitcoin and Ethereum.
    In short, risk-averse investors will go for coins with a low volatility. Those seeking big gains will, conversely, go for ones with a high volatility. But how do you calculate a project’s volatility?
    Not to worry, we’ve already calculated this for you. If you’re analyzing a coin, simply go to its page to find its volatility %. If you’re scouting for new coins, you can use this metric as a filter (see Figure 5 below).




Figure 5: CoinScouts.io Volatility filter




  1. Volume
    Trading volume shows how much value has been traded within a given time period. It serves as a gauge of how much interest the market has in a coin/token.
    We can also use trading volume as an indicator of liquidity. Liquidity is the ease with which an asset can be bought and sold. A liquid asset is one that you would have no difficulty buying/selling at its current market price. Conversely, in an illiquid market you may have difficulty buying/selling assets at that price. To sell the coin, you’ll have to drastically lower the price. To buy it, you’ll have to bid a lot more. As such, traders prefer coins with a high level of liquidity.



So, how do you know your coin’s volume? Go to CoinScouts.io and go to your coin’s page. Below the summarized statistics, you’ll find the coin’s 24 Hour Trading Volume. We even provide you with a 24 Hour Volume Change, so you can see if the volume is steady or perhaps higher due to some recent news.
You can also scout for new coins and use volume as a filter (see Figure 6). This way, you can easily ignore all the low-volume crypto projects. You’ll find that high-cap currencies tend to have a lot of trading volume, making them more liquid than other coins. However, low- and degenerate-cap coins may have little trading volume and hence be more illiquid.




Figure 6: CoinScouts.io volume filter



Step 3: Blockchain
After you have looked at/filtered the coin's use case and financial metrics, it's also important to check which blockchain it is built on. A project built on Ethereum may gain more traction than one built on a lesser-known blockchain. At the same time, it may face more competition from other projects built on the same type of blockchain. In addition, newer blockchains that have a strong selling point (like Solana, which is very fast) can get a lot of attention. All the tokens that are made on that blockchain can then benefit from the hype that comes along with it. So you may see that a new and popular token blow up quickly, even though there are already similar projects built on more mature blockchains.



As with the use case, each person has a different preference. Want to play it safe? In that case, you may want to put your money into a crypto project that is built on Ethereum or Binance Smart Chain. Want to roll the dice? You can then invest money in the native coin of a new blockchain or in a crypto project built on said blockchain.
On CoinScouts.io, you can see which blockchain a crypto project is built on. You can also use it as a filter to scout for coins and tokens built on the blockchain of your choice. To further assist you in understanding the blockchain landscape, we’ve made a page where you can compare all blockchains. You can find it here.



Comparing blockchains
On our page, you can compare blockchains based on financial and social metrics such as market cap, volume, and the number of people who follow the ecosystem on social media. That way, you can figure out which blockchains are popular, or which smaller ones are growing quickly and becoming more popular.




Figure 7: CoinScouts.io comparison of blockchains



You can also compare them on project metrics, like how long they've been running, how much money they've raised, and whether or not their mainnet is live.
Another way to compare the blockchains is to look at their fundamentals. We offer a clean comparison of consensus models, speed (transactions per second), block time, average transaction fee, level of decentralisation, and perceived strengths and weaknesses.
We will also shortly be adding metrics with which CoinScouters can compare network activities, such as the number of addresses, the number of new addresses/month, the total number of transactions, and many more metrics. This will enable our visitors to conduct a basic on-chain analysis!



On-chain analysis is the attempt to understand a blockchain in order to predict future price movements by analyzing a variety of metrics. We could dedicate an entire article to this form of fundamental analysis. For now, however, we refer you to blockchain influencers who are specialized in this field. You can find an overview of influencers here.
We personally recommend Will Clemente. Although he covers the on-chain analysis of BTC, you can apply many of his teachings from his video tutorials to other blockchains as well. He’s also pretty good at different forms of analyses (TA and derivatives-based analysis, among others).



Step 4: Project metrics
By now, you've narrowed your search for a token by considering its use case, financial metrics, and the blockchain on which it's built. Now, it’s time to assess the team behind the token. But where to start? After all, there are many dimensions that are bound together by some commonality that, as a whole, compose the construct “team”.
We'll go over a few of these dimensions. Other project indicators, such as the project's current successes (audit/fundraising/listings) and the project’s competitors, will be discussed in this chapter as well.




  1. Team
    Team size
    The simplest approach to evaluate a crypto project's team is to look at its size. Launching a cryptocurrency project usually does not require more than a handful of individuals. When a crypto project has dozens of individuals working on it, it means that the project has grown to the point where the team needs to be expanded!



Team background
Finding out who is behind a cryptocurrency project and their roles should be simple. This information should be prominently presented on the token’s website or on platforms like LinkedIn. Some projects prefer anonymity and use fake names and avatars for their team members. This is not ideal but shouldn’t necessarily raise red flags.
After you have found an overview of the team members, it’s time to assess the organizational structure, the mix of specializations, and the team members’ work experience.



These are some important questions to consider:
Do they have a good mix of technical and marketing, PR, customer service, and legal staff? Do they have lawyers, former bankers, or software engineers with sophisticated project experience?
Do they have prior experience working on cryptocurrency-related projects?
If not, do they at least have experience in relevant areas, like cryptography and payment technology?
Do they appear to have been in the industry for a long time?
Do they passionately share their insights and other trains of thought on Twitter?
Are the team members working full-time or part-time on the project?



Cryptocurrency projects also frequently list advisers alongside actual team members. While not directly involved in the project, they are able to provide guidance and support. When a team has well-respected advisers it also gives legitimacy to a project. Advisors have a reputation to uphold. As a result, you can be confident that they have done their due diligence on the project and the team they vouch for. However, be aware that some ‘advisors' will fabricate experience to bolster dubious crypto projects.



Project Maturity
The project’s age is a dimension that is frequently correlated to team size. After all, the longer a project has been around, the more time it has had to mature, and the more likely it is to have a larger team. Nonetheless, we treat this dimension independently.
Crypto is rife with projects that have only been operational for a few months. These projects frequently have a token with no real utility (yet). The product has yet to be built, and traders are drawn to the project with the promise that once completed, the price will skyrocket. Speculative traders, in particular, are naturally drawn to this. This, however, is not without risk. Promises to complete the product are not always kept. Furthermore, even when a product is released, it is not always met with the expected enthusiasm. Competitors are not standing still, and the crypto market as a whole frequently focuses on a different market trend.



An investor who prefers to play it safe will therefore choose a project that has been around for a while. These projects (often) have a working product that has already been widely adopted by the public. Furthermore, these projects have survived previous turbulent times. In a nutshell, they have proven to be legitimate and robust projects.
However, it should be noted that there are mature crypto projects that have not lived up to their hype. These "Dinosaur coins" have amassed a large number of investors who have held them for many years. They have failed to live up to the hype due to new technological developments in the blockchain industry that have rendered them obsolete, as well as fierce competition between different teams offering essentially the same thing. Sometimes, the product's potential market was simply exaggerated.



Team activity
The development team's activity on Github can be used to assess the project's progress. Given that developers' time is valuable, having a large number of them committed to a project indicates its health and possible worldwide adoption. How many developers are working on the project now? Are new features added regularly? Is the coding team following the plan? Answering these questions will help you analyze the project’s activity, as some well-known coins have low github activity, while others have a very active coding team.
You also want the team to be active on the “front-end”. Check their social media (Twitter/TG/Discord/Medium) for updates on product/partnership/listing developments. A crypto startup should tweet regularly to interact with its investors and make weekly announcements of some sort. Even community events with giveaways indicate an active team that is not idle. We've now briefly touched on the subject of social hype, which is another important factor to consider when evaluating crypto projects. This will be covered in greater detail in the following chapter of our tutorial (see Step 5: Hype).



Team location
When evaluating a team's quality, you can also consider their location. This is due to political, economic, social, and technological factors.



Political factors
Changes in government policy are examples of political factors. It is critical for crypto projects to be located in countries that embrace the technology and have stable regulatory frameworks. Investing in a crypto project located in a country that is generally opposed to crypto, or in corrupt and/or totalitarian countries is risky because it can make the political environment unpredictable.



Economic factors
Despite the fact that we live in a globalizing world and that capital can increasingly be raised on a global scale, the fact remains that location does matter. Capital markets are not fully integrated. Ceteris paribus, an American project will typically be able to raise more capital than an Indonesian one. Ideally, your chosen crypto project will be located in a developed country with a large capital market.



Social factors
In the case of crypto, social factors such as demographics and age distribution are extremely important! Crypto is more popular among the younger generations than older ones. As such, a country like Turkey is an intriguing market for crypto projects. Again, in the world of cryptocurrency, projects can quickly gain global traction. Nonetheless, it helps if the domestic market accommodates growth.



Technological factors
The speed of the internet, the reliability of a country’s electric grid, information and communication resources, marketing, and e-commerce technologies are examples of technological factors. Simply put, countries that are more technologically advanced will also have the technological infrastructure to nurture the growth of a domestic crypto project.




  1. To-date achievements
    Audit
    A smart contract audit verifies that the on-chain code powering a smart contract is free of bugs and security flaws. This is important to know, considering smart contracts routinely handle large sums of money, so even a minor flaw can cause massive losses. Users and stakeholders of the decentralized application in question could lose all ecosystem assets.



Bug-ridden smart contracts are unfortunately a common occurrence. They are often rushed and produced to fulfil investor demand in the booming DeFi business. Google it and you’ll see just how many million-dollar hacks have occurred in the crypto industry.
Auditors, like Certik and SlowMist, run tests and manually analyze the codes. Smart contracts frequently interact with one other, and any interfaces with third-party systems can make the system insecure. As a result, checks are generally extended to other smart contracts participating in any interactions, including those they interact with. The auditors' recommendations are communicated in advance to the project team, and their actions in response are documented in the final report.



In sum, an audit is regarded as a symbol of the project's authenticity and integrity. As a result, teams are eager to obtain an audit in order to gain user confidence and boost the project's credibility.




  1. Fundraising
    In its early phases, a crypto project often needs funds. They often receive these funds from venture capital funds. A venture capital fund is a group of institutional investors who want to be the first to invest in new businesses. VC fund managers examine thousands of projects for growth potential. They normally like to hedge their bets by investing in many projects simultaneously.
    Most traders look at the amount of money a crypto project has raised. This is a valid way to assess a crypto project’s potential and popularity. However, for a full fundamental analysis, you also want to do a check on the VCs. Having the right VCs backing a crypto project can make all the difference. The question is, how do you know the VCs who invested in the crypto project are good?



There are many ways to rank VCs. You can compare them based on peer reviews and ROI, as well as community involvement and social influence. More significantly though, you want to see that your token is supported by a VC with a long-term investment horizon.
When it comes to the time horizon, there are two ends of the spectrum for crypto VCs.
The first are true co-builders and crypto native long-term thinkers. They build with their portfolio companies and keep builders alive in weak markets. On the other hand, there are VCs looking to score quick and easy gains. They invest in short-vesting projects to profit from a bull market. Thanks to the blockchain's transparency, you can often identify which VCs still hold what % of their positions.



On CoinScouts.io, we have a list of reputable VCs. You can find it here. You can see what other tokens they invested in, and you can even use our “VC filter” when scouting for new coins and tokens! (see Figure 8)




  1. Accessibility for traders
    Perhaps you are looking at a project that hasn't been listed on any exchanges yet. However, if your coin or token is already available on the open market, you want it to be on as many exchanges as possible. Furthermore, your coin or token should ideally be listed on reputable exchanges with a large user base, known as tier 1 exchanges. When these two conditions are met, there may be increased demand for the coin/token because more people can get their hands on it.



When you visit CoinScouts.io, you will see a list of all crypto exchanges, along with their volumes and trust scores. You can also directly find it here.

Figure 8: CoinScouts.io project metrics filters




  1. Competitors
    At this stage, it's critical to identify the projects that will compete with your prospective project, as well as the legacy infrastructure that it will replace.



Fundamental analysis of these projects should ideally be just as rigorous. Although an asset may appear appealing on its own, the same indicators applied to similar crypto projects may reveal that the project you’re analyzing has weaker fundamentals than others!
You can find a quick overview of competitors on a project’s CoinScouts coin page (see Figure 9).




Figure 9: SushiSwap's similar/competing projects. Found on CoinScouts.io



Step 5: Hype
There are two easy approaches to gauge a cryptocurrency project's hype: the hype among crypto influencers and its community.



Crypto influencers
The crypto industry appears to be saturated with influencers. You can find them on Twitter and YouTube, where they frequently have hundreds of thousands of followers and subscribers. There are some people who give technical analysis or share their thoughts about what they think is going on in the market. Many others, on the other hand, appear to simply create content in order to market specific altcoins. The "shilling" of altcoins has become such a big business that even mainstream celebrities have started doing it.
Of course, when a crypto project is hyped by big names, it can positively affect the project’s brand awareness and token price. Nonetheless, this is no guarantee for success. As with VCs, you can tell the difference between those who have a long-term horizon and those who want to make a quick profit. Unfortunately, there are only a few influencers who promote crypto projects because they truly believe in them. We made a list of influencers who seem to genuinely enjoy exploring the crypto space and educate others about different projects. You can find that list here. You can also filter on said influencers when scouting for new tokens on CoinScouts.io. Nonetheless, take it with a big grain of salt whenever they talk about a project in hyperbole. They are neither financial advisors nor fortune tellers.



Influencers also have a better chance of making money than the ordinary trader or investor. They can often buy altcoins against private allocation terms. That is, they can purchase the tokens (at a big discount) before they become available on the secondary market. In exchange, they hype the altcoin to their followers. However, those with a short-term horizon will also be the first ones to dump them. Especially when it’s an altcoin with low levels of volume, they can use the buy bids from their hyped followers as their exit liquidity.
Many traders are aware of this and continue to participate in the "pump and dump" game. Even when they don’t believe in the crypto project. As long as they are the first of the many followers to get in, they may be able to sell the token for a profit before it plummets. However, this is similar to the game of musical chairs. If you’re the last to get out, you risk losing everything. Perhaps a game suitable for speculative traders. But not so much for balanced investors.



So, in a nutshell, it can be good for your crypto project to have influencers talk about it. However, the positive effects are often only short-lived when it’s a crypto project with a lot of hype but few other fundamentals. In the end, you should do your own research and not rely too heavily on these third parties when deciding whether or not to invest in a token. For that reason, we covered this step almost at the end of our tutorial. If you've concluded through your own fundamental analysis that it's a solid project, it's a plus if it's hyped online by influencers with large numbers of followers. But don't use it as a starting point.



Community
Projects with a lot of buzz have their own community of investors who share the same interests, ideas, and enthusiasm for the project. These crypto communities are typically found on social networking platforms such as Telegram, Twitter, Viber, Slack, and Discord. You'd ideally like to see that the crypto project you're looking into has a sizable community on these platforms. For starters, this could indicate that more people recognize the project's potential. Second, when traders feel like they are a part of a project's community, they often reward this with an unusual display of loyalty. Third, having a highly engaged community provides crypto projects with an effective communication platform.



Communities are difficult to build but they also erode slowly. As such, we believe a strong community is a better display of hype than the (often short-lived) hype generated by big influencers. However, it’s tricky to assess the size of the real community. Numbers on social platforms can be inflated by simple pump and dump schemes as we’ve mentioned before. Furthermore, the number of followers on these platforms can be (and frequently is) artificially increased. As a result, the number of followers is unfortunately a weak metric to measure the size of a community.



Step 6: Tokenomics
The final step is to study the crypto project’s tokenomics. CoinScouts is also working on integrating the tokenomics of crypto projects into the platform. In the meantime, however, make sure to read a project’s whitepaper for a full due diligence.



As you read the whitepaper, see if the token has the following properties:
Has utility in the ecosystem, and without it, the ecosystem will function less efficiently or not at all;
The majority of the tokens are not owned by a small group of people from the moment of listing;
The tokenomics make the token resistant to inflation;
Tokens can be sent between people quickly and in large quantities, making them scalable;
A token holder has financial (can earn more by holding them), or managerial (the holder has the right to vote and is able to influence the ecosystem) perks.



Closing chapter
After you've completed all of these steps, ask yourself one simple question: is this the right crypto project for me? It should be a simple yes or no question.
If it isn't, proceed to the next. There are thousands of projects to choose from!
If, on the other hand, you have a good feeling about a coin or token, it's time to decide at what price you want to enter. For this we use technical analysis.



In our next article, we'll go over the fundamentals of technical analysis. Stay tuned!


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