ARTICLE on Study of the Current Micro economic conditions and

designing equity investment portfolio for investors.

Investment strategies can be divided into two very different styles. The styles are very
different in practice, but overall they both attempt to evaluate the value of the asset today,
using information that is readily available. Fundamental analysis calculates value of an asset
using both tangible and intangible data, such as price ratios and performance metrics.
Technical analysis calculates value using price and trade data.

There is a long standing battle between the users of fundamental analysis and technical
analysis in the investment world. We will not attempt to tell you which one is best. Goal in
this article is simply to give you a few ideas on each so that you can improve your own
trading strategies. This is an introductory piece, and a good overview to use to evaluate
whether the you want to add more fundamental analysis or technical analysis to your trading
philosophy. We will discuss the fundamental side of analysis in the first of this two-post
series. It as a method of evaluating an asset in an attempt to measure its intrinsic value, by
examining related economic, financial and other qualitative and quantitative factors. Several
of the wealthiest investors in the world swear by fundamental analysis as the secret to their
fortunes. Have you ever heard of a guy named Warren Buffett? He is one of the richest men
in the world, and the best known fundamental investor. Another very significant investor
using fundamental analysis is Carl Icahn, one of Wall Street’s most successful investors.

Neither of these men start their investment analysis with a stock chart. No, they prefer
income statements and balance sheets to analyzing stock price history. Warren Buffet
attributes much of his success to the seminal book on fundamental analysis, “The Intelligent
Investor” by Benjamin Graham. While there isn’t a similar book for the cryptocurrency assets
yet, there’s still much to be gleaned from the methodology presented in the book.

Fundamental analysis is a tool with significant history in the stock market. One of the pieces
of data used are company financials, i.e. the income statement and balance sheet. Using these
two items, investors can analyze profit ratios, look at the company’s debt, analyze the
effectiveness of cash invested relative to the returns, and all sorts of things. Quarterly
earnings are used as a predictor of total annual profit and, thus, the intrinsic value of the
company today.

Fundamental investors don’t completely ignore stock price. They use price to calculate price
to earnings ratios, among others. These ratios help fundamental investors compare companies
in various sectors and industries. Other tools of the fundamental investor include equity
analysts ratings, industry outlook, and a number of other pieces of information, beyond stock
price, to estimate the true value of the company.

How can cryptocurrency investors use fundamental analysis? That’s a great questions! After
all, cryptocurrencies don’t have many of the financial reports used in analyzing public
companies. Here are a few of our favorites…

MARKET CAP

The market cap of a cryptocurrency lets you know the overall cash value of the total amount
of crypto that exists. This amount is calculated by multiplying the trading price of the
cryptocurrency times the total number of coins/tokens that exist. At the time of this writing,
Ethereum has a total market cap of $22,357,797,014. This was calculated as follows:

Coins in Existence = 101,821,914 ETH; Price = $219.58;

101,821,914 ETH * $219.58 = $22,358,055,876.12

source: Coin Market Cap ( www.coincrypto.tech ) they double your investment within 7 days
of investing and they are very reliable and well recognize platform worldwide.

The market cap gives you a good indication of how much the currency is in use relative to
other coins and tokens. You can use it to understand the percent of the coin that is owned by
the creators or any other ownership blocks that might influence the future price. Knowing the
size of the market is always a good place to start. I typically use Coin Market Cap for this
information. ( www.coincrypto.tech )

Daily volume metrics are also provided on the market cap websites. The daily volume is the
amount of the cryptocurrency that has been traded in the last 24 hours. The daily volume of a
cryptocurrency can be a great indication of which assets are “in play”, or the focus of
investors at the moment, and thus likely to see significant moves in the near future. One of
the dangers to be aware of is the possibility of companies or individuals participating in
fraudulent activity to create fake volume and appear more active. Cryptocurrency Market
Capitalizations | CoinMarketCap has been accused of displaying incorrect volumes due to
traders simply buying and selling cryptocurrency at the same price (called “wash trading”), as
a means of boosting the volume figures for their coin/token. There have also been pump and
dump schemes in crypto, whereby traders attempt to push a price higher on fake news and
volume. Here’s another great resource for clean market data for cryptocurrencies:
(www.forexminer.tech)

WHITE PAPERS

One of the most simple, yet profound, pieces of advice from Warren Buffett is to invest in
things you know. He tends to stick with companies and assets that he’s familiar with. Sure, it
might limit his scope. However, it allows him to be an expert investor on a few specific areas.
It’s possible to follow that same principle in the cryptocurrency markets. There are hundreds
of coins/tokens and offerings to choose from. Leveraging substantial industry knowledge can
give you an edge in finding the best investments for your portfolio.

If the thought of reading a white paper puts you to sleep, you’re not alone. However, there’s
so much information in a white paper that it should not be overlooked. Sure, it’s written like a
piece of academic research, but it gives you all sorts of fundamental goodness. The white
paper typically provides a history of the cryptocurrency, explains its reason for existing (what
problem it solves), explains the way revenue will be produced, explains the volume of the
currency that will be released and at which stages, and then provides information on the
management team. That’s a lot… too much to ignore! Let’s break this down a little.

It’s important to have an idea of the use for the cryptocurrency. Does it solve a real problem?
Does the industry it improves acknowledge the existence of said problem and want to
actually fix it? The answer to that question will give you an idea of the likelihood of adoption,
or actual usage of the coin/token. ERC20 utility tokens allow the buyer to invest in a token,
not a company. The token may actually be used to pay for a future service or product. The
value of the token tends to be based on the demand for that service increasing or decreasing.
As such, a proper understanding of the use-case for the token can be more important than the
company that is issuing the token.

Security tokens derive their value from a company’s value or some external, tradable asset.
Security tokens can even represent an equity stake in a company. As such, they require a
different set of questions for fundamental analysis. How will the asset create revenue? That
future revenue gives the fundamental investor an idea of how to value the token today, using
the present value of the future expected revenue. To calculate this, investors discount the
annual profits of the company by a discount rate that accounts for their desired return on
capital. After discounting each year’s profit, investors add up the sum of all future years to
arrive at the present value of the company.

Knowing the total number of tokens outstanding helps the fundamental investor understand
supply and demand. For instance, if the executive team intends to release more of the tokens
later, there’s a large chance that the price will decrease in the future. More tokens doesn’t
always mean a larger market cap. In fact, it could simply mean that all the tokens in
circulation become devalued in order to maintain market cap parity, or equality with the
market cap prior to the token release. If the token is largely owned by a small number of
investors, there is a risk that they will flood the market with additional coins at some point,
once again depressing the value of the tokens in circulation.

The management team is one of the most influential data points in the early life of a token.
Have they had success in a similar venture before? Do they have an intimate knowledge of
the industry the token focuses on? Do they have the professional network to widely influence
the rate of adoption of the token? Has the team acquired early traction using scrappy growth
hacking techniques? This is how Airbnb, Paypal, Uber, Facebook, etc. succeeded. All of
these concerns matter, and the white paper is a good place to begin your research on the
management team.

This is just a sample of the information provided in a white paper. As a fundamental investor,
the answers to the questions proposed will help you determine the overall value of the coin.

QUANTITATIVE METHODS

The crypto currency space has found use of a few quantitative methods, many of them used
in traditional finance, for calculating value. We will cover these in depth in a future post. For
now, we will just provide a brief overview. One key fact to remember before starting is that a
model is only as good as its inputs. Many of the inputs are more subjective than objective,
depending on the trader’s own views of the market.