In one of our previous materials, we talked about the main problem of fundamental analysis with reference to the crypto market, as well as the lack of the ability to compile an analysis of financial statements of companies. Startups are not in such a hurry to disclose financial models that guarantee future profits. They openly declare in their white papers that the funds collected under the ICO will be spent at their own discretion. And while the crypto assets market is only attempting to try on any laws and rules, investors are happy with this situation. As for those who do not believe in empty promises, we will describe the indicators of fundamental analysis, which, if interpreted correctly, can be applied in the conditions of the crypto market.
To begin with, without basic indicators of fundamental analysis such as the Consumer Price Index, the Inflation Index, and the Consumer Confidence Index, it is difficult to imagine a balanced marketing strategy for any product within or outside the blockchain. This kind of analysis adds weight to the white paper and demonstrates the seriousness of the development of the model for profit on the part of the developers.
Of the financial factors that can affect the course of the cryptocurrency, we can note the increase in the rate of the U.S. Federal Reserve. Not so long ago, the actions of the Federal Reserve Bank of America did not represent a significant value for the movements of the crypto market. A constant increase in the rate to strengthen the dollar, however, not only affects inflation but also increases interest in cryptocurrencies. Tired of the race for the dollar, economic institutions are increasingly considering crypto assets as an alternative to the payment instrument.
The evaluation of social and political factors is also an important indicator of fundamental analysis. Take, for example, Venezuela, which released the El Petro, the first national currency aimed at circumventing the U.S. sanctions against the country. On the one hand, Donald Trump, no matter how he calls for a boycott of El Petro, is unlikely to affect the circulation of coins in the crypto environment. On the other hand, Nicolas Maduro will have to do a lot of work so that the current reputation of El Petro does not bring down its value. Meanwhile, disgruntled Venezuelans regard the cryptocurrency as a regular toy of a non-credible political regime.
The political factor also affected Russia, as one of the most important participants in the crypto market. The ban on servicing the citizens of the Crimea by the largest Binance crypto exchange imposed under the same sanctions can only affect the development of the cryptocurrency market in the country. Moreover, legislative initiatives aimed at regulating the industry were planned to be tested on the territory of the Crimea.
At the current stage of development of the crypto market, legislative initiatives in general play one of the most vital roles. China was the dominant region of the world for Bitcoin until the government of the country banned ICOs and closed the local exchanges. A thaw in this respect may once again shake up the cryptocurrency market. While Chinese investors are hiding, European ICO projects are developing against the background of very cautious initiatives of euro regulators.
And if such political events as the presidential elections in Russia or the US do not have a particular impact on the Bitcoin exchange rate, then the emerging political sentiment, to which the largest players of the market are trying to adjust, are able to introduce their own adjustments. We have seen this perfectly demonstrated by the example of the ban on advertising of ICOs and cryptocurrency on Facebook, Google, and Twitter. In an effort to protect gullible citizens from scams, these sites have significantly limited the marketing capabilities of a number of very promising blockchain projects.
Thus, to date, we can distinguish three important indicators of fundamental analysis for the crypto market, including financial (the actions of regulators), social (the attitude of the population of a country to the circulation of cryptocurrencies), and political. And the more developed form the crypto asset market takes, the more sensitive it will be to the actions that traditionally have an impact on classical financial markets.