Analyzing Crypto Assets from On-Chain Data: A Complete Guide to Crypto Fundamental Analysis

Want to grasp the true value of digital assets? The key lies in learning how to interpret on-chain data and project fundamentals. This guide will help you understand how to make smarter investment decisions through fundamental analysis.

Market Overview: Opportunities and Risks Coexist

The current crypto market is in a rapid expansion phase. According to the latest data, over 25,000 digital assets have been registered worldwide. In recent years, the total market capitalization has surpassed $3 trillion, more than a tenfold increase since early 2020. Data shows that by 2030, the crypto asset market is expected to reach $4.94 trillion, with an annual compound growth rate of 12.8%.

Notably, the demographic of crypto investors is trending younger. According to the University of Chicago’s Center for Public Opinion Research, most digital asset traders are under 40 years old.

However, this market is not without risks. Due to volatile asset prices, combining fundamental and technical analysis can help reduce risks. Some investors are attracted by the high return potential, while others are deterred by the high volatility.

Core Logic of Fundamental Analysis

Fundamental analysis is a method of evaluating whether an asset is undervalued or overvalued by assessing various internal and external factors. This approach helps investors understand the long-term value prospects of an asset.

This concept first appeared in the 1934 publication of Security Analysis, which advised investors to thoroughly consider all fundamental factors related to securities before investing. For digital asset traders, predicting an asset’s “intrinsic value” through fundamental analysis and determining whether it is mispriced by the market is key to making profitable decisions.

Differences Between Traditional and Crypto Market Fundamentals

Traditional stock market fundamental analysis relies on financial metrics such as earnings per share (EPS) and price-to-book ratio (P/B Ratio), which clearly reflect a company’s actual value.

But crypto assets are different. As a relatively young asset class, there is currently no unified, comprehensive valuation framework. The influence of fundamental factors on crypto prices is relatively limited. However, as the market matures, more precise evaluation methods are gradually forming.

Three Pillars of Crypto Asset Fundamental Analysis

1. On-Chain Data Analysis (Blockchain Metrics)

Crypto assets are unique in their transparency— all transaction data is recorded on public blockchains, allowing us to extract real information about investor activity.

What is on-chain analysis?

On-chain analysis is based on actual blockchain data, not market sentiment or technical indicators. This method helps distinguish between speculative value and real utility of an asset.

Key on-chain indicators include:

Hash Rate
Hash rate measures the total computational power of a proof-of-work (PoW) blockchain network. The higher the hash rate, the more difficult it is for a 51% attack to occur. A continuous increase in hash rate usually indicates that miners are optimistic about mining profitability; conversely, a decline suggests miners are “throwing in the towel,” believing mining is no longer profitable.

For example, Bitcoin (BTC) currently has a circulating supply of 19,967,340 and a max supply of 21,000,000, with a market cap of $1,776.97B. Similarly, PoW-based coins include Bitcoin Cash (BCH, current price $606.34), Bitcoin SV (BSV, $18.42), Dogecoin (DOGE, $0.13), Litecoin (LTC, $77.37), and Monero.

Active Addresses
This metric counts the number of blockchain addresses involved in transactions within a specific period, reflecting the network’s real usage.

Transaction Volume and Network Fees
Consistently high transaction volume indicates genuine circulation of the digital asset. Network fees (like Ethereum’s Gas fees) reflect real-time market demand—users increase fees to prioritize their transactions, creating an auction-like mechanism. When halving events occur, transaction fees often rise to compensate miners; if not, miners may leave the network, threatening security.

2. Project Fundamentals Metrics

This part uses qualitative analysis, focusing on internal and external project factors.

Team and Execution Capability
Investment guru Warren Buffett repeatedly emphasizes that the success of any project depends on its team. When evaluating a team, ask yourself:

• Do team members have successful experience in this field?
• Do their skills and experience support the project’s goals?
• Is the GitHub contribution record active? Are code repositories regularly updated?
• Has the team been involved in suspicious projects or fraud?

A project with a codebase that hasn’t been updated for years is usually less attractive than one with ongoing iterations.

Whitepaper Quality
The whitepaper is a key document every potential investor should read, outlining the project’s goals and technical foundation. A good whitepaper clearly states “who, what, when, and why.” Bitcoin’s whitepaper remains a benchmark in the industry, depicting a vision of decentralized finance that sparked a financial revolution.

Competitive Landscape Analysis
Comparing strengths and weaknesses against competitors helps you understand the project’s true potential. Projects that seem attractive on the surface may not stand out after competitive analysis.

Roadmap
A clear roadmap should specify key milestones such as testnet release, mainnet launch, and new feature iterations. Projects with well-defined plans and ongoing progress are generally more trustworthy.

3. Financial Metrics Analysis

Market Cap
Market Cap = Current Price × Circulating Supply. This indicates the relative stability of an asset. Although even the highest market cap asset like BTC can fluctuate, high market cap assets tend to withstand market shocks better. Low market cap assets are more volatile, offering both explosive growth and significant risk of decline.

Liquidity and Trading Volume
Good liquidity means easier buying and selling. High liquidity environments tend to be more stable, with milder price swings and lower investment risk. 24-hour trading volume reflects market activity—rising prices accompanied by increasing volume are more sustainable, while small-volume price swings may be fleeting.

Circulating Supply and Max Supply
Circulating supply is the total number of tokens currently traded. For example, BTC’s circulating supply is 19,967,340, with a max supply of 21,000,000, meaning about 2.1% of the supply remains unreleased. Dogecoin’s circulating supply exceeds 152.3 billion, with no fixed max supply.

Understanding supply dynamics is important—some projects create scarcity by limiting new token issuance, which can attract investors optimistic about growth. It also helps avoid the “cheap coin” bias, where low price alone tempts purchases.

Quick Investment Tips

• Look for projects with high growth potential
• Focus on assets with strong network effects
• Avoid emotional and bias-driven decisions

The Importance of Comprehensive Analysis

Fundamental analysis enables you to distinguish between market price and the “true” value of an asset—this is a core skill in digital asset trading. While technical analysis helps determine entry and exit points, fundamental analysis aids in predicting long-term price trends.

In fact, more professional traders are adopting a combination of fundamental and technical analysis strategies. By integrating on-chain data, project metrics, and financial data, you can quickly assess any crypto asset’s investment value.

We hope this guide helps you do your homework before investing in crypto assets and make more rational decisions. Remember: in this rapidly evolving market, continuous learning and rational analysis are always the keys to success.