One of the practical applications of fundamental analysis is to identify undervalued assets and their further purchase in the hope that the market will value them and their price will rise.
According to the laws of supply and demand, scarcean asset tends to rise in price relative to a coin with a stable emission rate (ceteris paribus) over time. Therefore, a fundamental analysis must certainly imply a study of the characteristics of monetary policy, which can differ dramatically in different crypto assets. For example, the maximum amount of the offer, the rate of inflation, the rate of block generation, the frequency of reduction of the reward to miners (if any) may be different, etc.
The Mining-Cryptocurrency.ru portal offers readers the translation of an article from the analytical firm Messari, which briefly describes the various types of monetary policy of cryptocurrency projects.
The variety of approaches used in cryptocurrency projects requires a more accurate, if not radically new, approach to determining and categorizing a monetary offer.
Messari's classification impliesseveral categories of the offer: maximum, predictable, identifiable, outstanding and liquid. This classification is useful for understanding the variety of approaches to managing the supply of crypto assets. However, she cannot say how this monetary mass was created and will be generated in the future.
However, you can try to find out and classify other aspects of monetary supply. For example:
- Release method and the distribution of the first coins (this topic is described in detail in the work of Nick Carter from the analytical firm CoinMetrics)
- Primary offer. It involves an assessment initiallycoins issued, the characteristics of their distribution among stakeholders (investors, founders), which part of the assets goes to the operational budget of the project, as well as to airdrops and premining rewards.
- Type of issue outlines the monetary policy governing the issuance of new coins of a particular crypto asset.
- Maximum offer limit (Supply cap) - whether the emission is strictly limited or constant.
Now consider the various options for monetary policies among popular crypto assets.
Release Method and Initial Proposal
- Fair launch. It means there is no preliminary mining, a coin can be mined only from the moment the blockchain is launched. Examples: Bitcoin, Monero, Dogecoin.
- Instagram and mining in stealth mode (stealth mine). At an early stage of the issue, projects stealthily mine assets without first announcing the start of coin mining. Examples: Bytecoin, Steem.
- Integrated centralized budget system. The founding team continuously receives remuneration for the development of the project as a percentage of the award or superblocks. Examples: Zcash and Zcoin.
- Crowdsale. Part of the initial offer is sold to investors through public token sale for other crypto assets (most often ETH or BTC). Examples: Tezos, Basic Attention Token, and Augur.
- Private sale. Part of the initial offer is sold to a narrow circle of investors (mainly investment funds or business angels). Examples: Cosmos, Neo, and Vechain.
- Airdrop. Part of the initial coin offerdistributed among community members for free or in exchange for performing small tasks. New assets are often handed out to holders of popular coins (for example, Bitcoin) and this approach provides an honest, distributed and transparent distribution. Examples: Decred, Nano, and Ardor.
- Central distribution. Some coins can be distributedthrough airdrop, gradually sold to a narrow circle of investors or allocated to partners. However, the entire initial supply of coins is controlled centrally. Examples: XRP, Ontology.
Registry fork. Holders of the original crypto asset receive a proportional amount of the new currency obtained through the controversial hard fork. Examples: Bitcoin Cash and Ethereum Classic.
Sometimes forks imply extra premineor mining in stealth mode to cover costs, finance further development and reward the project team. Examples: Bitcoin Gold and Bitcoin Diamond.
The following illustrates the distributional characteristics of the 80 most capitalized assets: