Mr. Y here with a little inside look at fundamental analysis and market psychology. Exclusively on Blockchain Whispers.
Controlling your emotions is the single most important factor when it comes down to success or failure. Miss A said that right. We all have to deal with bias and fallacies. The abillity to identify and control that subliminal influences is the key to make money. Every decision you make has to be based on rationality and fundamental principles. For example, what i see very often is people saying "this asset is 50% from its ATH, it has to go up again." This is a classical hindsight bias, because market sentiment is now different since back then when this valuation was reached. Another thing i see often is people that don't understand probability. People irrationally asume that a random event is more or less likely to occur because in the past it did. this is called the gamblers fallacy.
The past is not a good indicator for predicting the future. Altough there can be similarities. History does not repeat itself, but it does often rhyme. But making assumptions on the future based on events in the past is very dangerous.
Another dangerous thing is the own mindset, i see people who think "I deserve that, because of that it has to go up"...this is completely irrational. Or people shift their own opinion in the direction they want it to be, they make this without knowing it and they thought they made a rational decision. But the reality is a far cry from it. So control your emotions and don't let them influence your rational thinking process. The biggest earners i know all have this common attribute, they are dead inside. They learned to control their emotions.
The same with scams. The vast majority of people who get scammed have the same mindset, they let emotions control their thinking, namely greed. One of the first things i learned on the streets was "if something is too good to be true it can only be a lie." If you remember this sentence it is tomorrow 10 times harder to scam you. People who hear these outrageous fairy tales of getting-rich-quick stories or ETH-giveaways let greed take over their rational thinking. Don't let this happen to you.
Now i come to fundamental analysis. Traditional valuation methods like Discounted Cash Flow Analysis and Comparable Transactions Methods etc..are not really suitable for crypto assets. This is a brandnew and emerging asset class, so there is no standard framework for valuation. There are some methods that are more suitable but i myself am not a big fan of this calculations and standard deviations. Like Michael Novogratz said, if you spend some time in the markets and know your stuff you get a feeling for that, some kind of emotional intelligence. Others would describe it as luck, but it it not luck. It is a certain mindset and attitude.
One of the most important things to look for is the question "does this asset really need a blockchain?". 9 of 10 services are better suited with a centralized service, because it is in most cases faster, cheaper and more efficient.
The killer feature of a blockchain is censorship-resistance. If a certain service needs this and trustless operations then it is suited for a blockchain. Most projects don't need that specific setup and are in for making a buck. There is no need to decentralize everything. And remember this, 98% of these shitcoins will not be alive in a year from now.
Institutional money will not invest in Dentacoin, Dragonchain or Reddcoin. They will invest in protocols and platforms. Most of the money will flow in BTC and ETH.
The second thing i look for is the team. I invest in people, not in ideas. The use-case can be the best in the world, if the people behind it are not capable to pull it off it is not worth my time. These two points are the starting points and have to be given before i look at a project further. Then i look at the use-case, make a comparison to existing or future markets to see what growth potential it has, then i take a close look at the source-code and the technical documentation.
Another important factor is the progress of the project and the possibilities i see for future events that could influence the price. This is the standard valuation i use, after this there are some more sophisticated methods and points to look for. But, the second lesson i learned on the street was, "never reveal anything you know." :-)
Then i take this data and i assign a number to it, a value number. How much should it be worth at the given circumstances and the time of now? If it the marketcap is higher then i don't invest, if the mc is lower then the project is undervalued and i invest.
For every dangerous mistake you make there comes a dangerous creature that takes advantage of it. we are Sharks and we can only live because these mistakes are made. As long as the markets stay irrational we can make money. If the market were rational everything would be valued according their true value.
So, the first step is to assure that you are not bait, most important attribute to assure that is controling your emotions. Then become a student of the game and one time you will maybe end up being a shark yourself.
So, i wish you a good night and always remember:
Y stands for danger
- stay dangerous
Blockchain Whispers Baby!