Crypto Fundamentals

A blockchain is a distributed ledger — a database that is shared and synchronised across thousands of computers (nodes). Every transaction is recorded in a "block" that is cryptographically linked to the previous block, forming a chain.

This structure makes the data immutable: changing any historical record would require redoing the cryptographic work for every subsequent block and controlling more than 50% of the network — computationally infeasible for established networks.

Different blockchains have different properties: Bitcoin prioritises security and decentralisation; Ethereum prioritises programmability; XRP prioritises speed and low cost for payments.

Tokenomics refers to the economic design of a cryptocurrency: total supply, circulating supply, emission schedule, distribution, and utility. These factors directly affect price dynamics.

A fixed supply (like Bitcoin's 21 million cap) creates scarcity. Inflationary tokens (where new supply is continuously created) require constant demand to maintain price. Deflationary mechanisms (token burns) reduce supply over time.

Vesting schedules matter: if a large percentage of tokens are held by early investors with upcoming unlock dates, selling pressure may increase. Always check the token unlock schedule before taking a position.

On-chain data is publicly available on the blockchain and provides insights that price charts alone cannot. Key metrics include: active addresses (network usage), exchange inflows/outflows (selling/buying pressure), and miner behaviour.

Exchange inflows rising sharply often precede selling pressure — holders are moving coins to exchanges to sell. Exchange outflows suggest accumulation — coins moving off exchanges into cold storage.

The MVRV ratio (Market Value to Realised Value) compares the current market cap to the aggregate cost basis of all holders. High MVRV historically signals overvaluation; low MVRV signals undervaluation.

Crypto markets have historically followed 4-year cycles tied to Bitcoin's halving events (when the block reward is cut in half, reducing new supply). Each cycle has featured a bull market, a peak, a bear market, and an accumulation phase.

The four phases of a market cycle: Accumulation (smart money buys at low prices), Markup (price rises, retail enters), Distribution (smart money sells to late retail buyers), and Markdown (price falls).

Cycle timing is not precise — the market does not follow a calendar. But understanding where you are in the cycle helps calibrate risk. Buying during accumulation and reducing exposure during distribution is the general principle.

Crypto does not exist in isolation. Macroeconomic factors — interest rates, inflation, dollar strength, and global liquidity — significantly influence crypto prices. When the Federal Reserve raises rates, risk assets (including crypto) typically face headwinds.

Regulatory developments are a major driver of crypto price action. MiCA (Markets in Crypto-Assets) in the EU, SEC enforcement actions in the US, and central bank digital currency (CBDC) developments all affect market sentiment.

Monitoring macro conditions and regulatory news is part of a complete analytical framework. Technical analysis tells you what price is doing; fundamental and macro analysis helps explain why.