12 Steps of Crypto Fundamental Analysis Series
Step 12: Choose an Entry Point
Today, we’re going to be talking about the very last step in my fundamental analysis decision-making process: choosing an entry point. Now that we’ve already dedicated so much of our time to looking into a project, to studying the team, to studying the technology behind it, to studying the token metrics and the way it will fit into the new economy, it’s time to finally decide on where we’d like to position ourselves in the market to get invested in the projects of our choosing. Finally, we are ready for all of our effort and time to come to fruition and actually fund the blockchain investment we’ve developed the strongest positive opinion about.
As a quick note, we’re not talking about day trading here. If you’re interested in quick daily returns or swing trading, then there’s an entirely separate discussion that can be had on choosing an entry point as a swing/day trader. Using plenty of different market indicators, day traders will often look at whether an asset is overbought or oversold, but we’re looking at more long-term investment strategies. Rather than checking the MACD and RSI to look for the perfect minute or hour to buy an asset, I’m looking at the right day, week, or even month to purchase the asset.
This step all comes down to knowledge. The more I have, the better my decisions will be. I look at different announcements and items on the team’s roadmap to see what they’re striving for in the future. If the cryptocurrency is already out and trading, then even though I’m not using day trader tactics, I still have common sense. For example, I don’t want to try “catching a falling knife.”
The chances of you purchasing a cryptocurrency that’s in decline at the exact moment a trend reversal is about to happen is very unlikely. Because of that, I may let the currency continue to drop in value for a little longer to see what type of a discount I can get on it. Maybe some critical news came out about the regulatory future of the asset and even though I’ve done the due diligence and trust the team and their legal advisors to pivot and comply effectively, many traders may not know that and may want to dump the currency. If that’s the case, I want to let some of that price trim off a bit more before buying in since it will allow my investment to go further.
If I’m looking at a potential blockchain investment that has notcompleted its ICO yet and does not have a cryptocurrency trading in the markets, then things are very different. I never want to rush into an investment decision, but there is an increased sense of urgency. Generally speaking, most blockchain projects offer incentives to benefit early investors and those putting faith into the team and project. That incentive is typically a bonus amount or percentage of tokens from the project depending on the time of investing. The earlier you are to the investment party, the higher the token bonus is going to be. This is why every single step of the 12 steps is crucial. If I’ve already properly vetted and have decided on a specific blockchain project to invest in, then things are easy when I get to this step.
The important thing to remember through all of this is that due diligence is much more important (and valuable) than making rash decisions. Token bonuses are certainly nice additions to your initial investment, but they mean absolutely nothing if the “team” behind the supposed-project is just going to exit scam investors as soon as they’ve raised the funding they want.
I hope I’ve been able to help you learn some of what I consider to be the most important steps of researching and analyzing any potential investment (blockchain related or not in many cases). Ultimately, you’ll definitely have seen that a lot of this process comes with time and experience as well. There’s no magic formula or specific number I’m looking for at any one of these steps, they’re all personal judgement that you’ll need to learn to develop over time. Hopefully though, I’ve been able to tell you not what to think when evaluating a project, but have been able to help you consider how to think when analyzing a potential blockchain investment. Best of luck out there and as always, Happy Trading!
