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Basic metrics for analyzing prices of different cryptocurrencies

Written by Vladislav Akelyev
Written by
Investing reporter
3   min.
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You must analyze asset prices to invest profitably. In this article, we have prepared basic metrics to decide whether to invest in a particular coin. Since cryptocurrencies are already deeply integrated into the global financial system, we will not consider macroeconomic factors such as China’s foreign trade operations, the actions of the US Federal Reserve, the state of the Eurodollar financial system, or liquidity in the markets. For analytics, we will use these services with metrics:

  1. Cryptoquant
  2. Nansen
  3. Intotheblock
  4. Messari
  5. Santiment
  6. Glassnode.

We recommend using all of these services. But what to look for in them? Read on!

Bitcoin

Of course, you have access to a large number of reviews from analysts, hundreds of videos from crypto bloggers, but it is important to evaluate the asset in which you are investing yourself. What to look for before investing in bitcoin?

  1. Network data (number of active addresses and network hashrate, number of transactions, reward for miners, and other on-chain data)
  2. Number of coins stored on exchanges, netflow, and outflow
  3. Growth or fall in demand for USDT and other stable coins
  4. The number of stable coins on exchanges.
  5. Accumulation by large market players and data from portfolios of large funds (Grayscale Bitcoin Trust, etc.)
  6. Miner positions
  7. Number of addresses with profit or loss from a certain price level.

Also you should check key market data:

  1. Volumes of open interest
  2. The volume of trading on spot exchanges
  3. Funding rate percentage
  4. Volatility
  5. Futures premiums
  6. Activity in the options market
  7. The average size of margin leverage in the market
  8. News background
  9. Dynamics of supply and demand in the OTC market.

Ethereum

Ethereum is the second most important cryptocurrency in the world. You need to be a little more tech-savvy to evaluate it, because it’s not just a coin, it’s a network for other cryptocurrencies. What metrics should you pay attention to?

  1. Network data (number of active addresses and network hashrate, number of transactions, reward for miners, and other on-chain data)
  2. Number of coins stored on exchanges, netflow / outflow
  3. Number of stable coins on exchanges
  4. Accumulation by large market players and data from portfolios of large funds (Grayscale Bitcoin Trust, etc.)
  5. The amount of ETH locked in the DeFi market and smart contracts.

Key market data:

  1. Volumes of open interest
  2. The volume of trading on spot exchanges
  3. Funding rate percentage
  4. Volatility
  5. Futures premiums
  6. Activity in the options market
  7. The average size of margin leverage in the market
  8. News background
  9. Dynamics of supply and demand in the OTC market.

DeFi markets

Now it’s worth talking about projects based on the Ethereum network and the like. This is where the characteristics of the team behind the projects are added to the technical metrics. Let’s take a closer look at what these metrics are:

  1. Network data and fundamental project data (on-chain data)
  2. Technology at the heart of the project
  3. Ethereum price (for ETH projects)
  4. Sentiment in social networks
  5. Amount of funds deposited
  6. Number of tokens held on exchanges, netflow / outflow (God Mode by Nansen provides interesting data)
  7. Market rates of return and asset lending rates
  8. Number of decentralized stablecoins in the market
  9. The project team
  10. Fund investments
  11. Accumulation by large market players and data on portfolios of large funds (Nansen provides useful information on movements within the blockchain and helps to track the tokens with the highest activity)
  12. ETH gas level (if the project is based on the Ethereum network)
  13. The dominance of BTC and ETH in the market

Other coins

For the rest of the coins from the top 50 in terms of capitalization, the situation is similar to DeFi. Still, there is no such binding to Ethereum or the native DeFi token from another ecosystem. So pay attention to the following metrics:

  1. Truly working technology
  2. The project team
  3. Sentiment in social networks (data available in Santiment)
  4. External financing
  5. Having its own internal ecosystem (like Polkadot and Solana)
  6. Listing on top exchanges
  7. Age of the project.

Separately, we can highlight the coins of the BNB, FTX, DYDX, and other exchanges. But, of course, they also depend on the performance of their exchanges.

Some such well-established projects as Litecoin, Dash, Ripple, Dogecoin, Ethereum Classic, Neo have their own specifics close to bitcoin metrics instead but tied to liquidity in the market and the news background. Among such projects, ADA, IOTA, Tezos stand out, which are pretty tech-savvy and have strong teams and acceptance in the crypto community.

Conclusion

You should remember that most of these metrics only affect the asset in a growing market. During a strong downtrend, most metrics stop working.

The combination of all these indicators and possible insights makes price prediction a complicated process. However, investments through portfolio indices make it possible to neutralize the result of an erroneous forecast for a particular project separately. For example, in the ECOS application, you can invest in crypto portfolios formed by analysts with a suitable level of risk and get the maximum return.


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