Crypto Decrypted

20Interpreting Charts

With a rich but accessible understanding of history and context, we can now deliver step‐by‐step guidance on making crypto a productive element of any portfolio.  This is enhanced because public blockchains provide a rich dataset from which investors can analyze information and make a more informed decision. With stocks, an investor may have company data to aid in investment decision making and then use technical price analysis to make more informed trading decisions. With crypto, an investor has crypto project information to analyze, similar to company data, but perhaps not as rich. However, they have fundamental analysis of blockchain data and technical analysis of price movement.

This blockchain data can be quite rich with information to glean because a lot of activity is tracked. Remember, blockchains are networks and provide a network good; therefore, they also have network effects. In essence, network effects focus on the theory of Metcalfe's law – that the value of the network is proportional to the square root of the users (see Figure 20.1). Think about it. If you have one user of the Facebook social network, the value is not zero, but it's close. Now, if you add another user, the value goes up nonlinearly. When you add hundreds of users, the value increases. When you add tens of millions of users, the network becomes defensible against competitors.

A good example is Facebook against Google+. When Google+ came out, it had a lot more features than ...