Fundamental analysis examines various factors underlying the value of cyptoasset. Fundamental analysis seeks to know whether a cryptoasset is undervalued or overvalued. In traditional securities analysis that would include financial factors such as cash flow, but in crypto we would look at different factors intrinsic to these types of technologies. Let’s observe the top 5 coins this past week.
No other category of fundamental metrics matter as much as those on the network, or more aptly onchain. These metrics measure the internal activities occurring within blockchains. Onchain volume is one such metric that allows us to observe the total dollars moving through the chain on a given day.
Bitcoin remained the top cryptoasset this past week growing by 63% with a low of $3.4 bn and a high of $5.7 bn. XRP grew volume by over 7k% on May 6 to hit a high of about $3 bn until falling the next day back down to its more usual $100 mn range. This anomaly was most likely induced by Ripple enabling xCurrent 4.0. ETH grew its volume the most at 163% while BCH lost the most with a decline of 67%.
ETH held the top spot in total transactions occurred ochain with an average of about 700k operations. As a note, different use-cases result in different outcomes. For instance, the application focus of ETH would encourage more transactions than the hedge asset of which BTC focuses on. BCH grew its transactions the most this past week at 66%, with a daily change high of 212% on May 10. BTC was the slowest grower at just 4%. XRP also ended the week nearly doubling where it started.
All of the top 5 cryptoassets profiled saw upswings in exchange volume at the end of the week. BTC held its consistent rank as top cryptoasset traded on exchanges. Those swings were:
It’s unclear as to why volumes grew so much over the past week, but crypto advocates are generating marketing as of late to encourage adoption. For instance Grayscale launched their “Drop Gold” tv campaign and the NYC Blockchain Week kicked off just before this past weekend. The stickiness of these positive trends will be judged after the marketing fades.
It’s important to observe the social activity of these cryptoassets because it reveals the chatter and sentiment going on in the market and within coins. Looking into reddit active user numbers for instance, allows us to better gauge the engagement of a cyrptoasset’s human network. The average weekly numbers are:
Another way to understand the impact of social networks within crypto is to measure the active ratio, which reveals if a community is inflated with inactive users that don’t engage with the forum. The lower the number the more likely each of the total users are engaging. BCH has the lowest number by far with 22 while LTC has the highest at 390.
Without a doubt, we now need to focus on what the software developers have been doing, as quantitative metrics of the development of these technologies are a must. As a caveat bigger doesn’t always mean better, yet it is useful to measure code commit activity on the cryptoassets’ software repositories.
ETH dominated the recent weekly commit activity representing 72% of top 5’s total. ETH historically outperforms in this category. This could be because ETH so much more dynamics to deal with as an application first protocol. It is also aided by having the most contributors listed, at about 1k, of the top 5 cryptoassets. LTC had no commits which highlight the attitude that lead developer from that cryptoasset have neglected it. XRP, BTC, and BCH did about the same levels of code activity.
Fundamental Analysis in hindsight
Overall, we can see that these fundamentals communicate a story about the underlying value of these cryptoassets. There are caveats, distinctions, and notes we must keep in mind but these are helpful ways to get a sense of comparison. BTC’s market cap gained the high of 9% this past week while LTC lost the most at .9%.
From this fundamental analysis, we can see why LTC fell. It had a severe lack of developer support, drastic inactivity on social media, and a stagnating chain. Although XRP displayed some increased network usage and announced a new software update, it still lost value over the week. Fundamental analysis might not always reflect the market’s outlook in the short term but these factors and categories might give us a more accurate glance in the long term.
By Peter Ryan
Peter Ryan is the CEO & Founder of Ryan Research. He led research efforts at CoinDesk, the most popular cryptocurrency brand in the world, where he produced data insights, cutting-edge reports, and useful tools to help users better understand the complex industry. Prior to that, he was an analyst assisting venture capitalists and startups in making smarter decisions through data. He received his B.A. from New York University in economics with a double minor in business & web development, as well as a certificate for business & financial modeling from The Wharton School at the University of Pennsylvania.
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