Fundamental & Technical Analysis of Cryptocurrency
When it comes to the stock market, forex trading, or cryptocurrency trading investors always focus on the analysis before investing in the market. The investor wants to predict the authentic future of the markets by analyzing the market. Fundamental & Technical analysis simply helps out the investor where the market will go.
But what it means by fundamental & technical analysis. We will cover all the details in this article so you can easily understand.
In the crypto space, fundamental analysis means looking at the financial structure of the coin. For example, how well is the project by looking at different aspects of the coin?
There are different kinds of points we will cover in this section like mentioned below:
- The uniqueness of the coin.
- How well is the project?
- The team behind the project
- Team social accounts.
- Social media activity.
- Github code.
- Market Cap.
- Coin Supply
The Uniqueness of the coin
We have to look at the properties of the coin. Like how much unique the coin is to others. In simple words, we will look into the utility of the coin like how it’s better than other projects in the market.
How Well Is The Project
We will consider other aspects too. Sometimes the project is good but its alternative is already in the market. If the project doing the same thing as others doing in the market then we have to look at other aspects of the coin like how well it’s doing. For example its transaction speed per second, gas fees and its uptime, etc.
The Team Behind The Project
Always look at the team behind the project. Check if they have done similar things in the past & how those things have gone so far. Find any well-reputed person on the team.
Team Social Accounts
You can also check the social accounts of the team to get confirmation about the authenticity of the project. Scan the social accounts like LinkedIn of the team to know more about the project. Visit the project website & see if the team members have given their social media accounts, then verify those accounts.
Social Media Activity
Always check the social accounts of the project itself and see how much they are active on their accounts. It is important to check their social presence is actively engaging with the audience or not.
It is always a plus point if the project team actively maintains their code or pushes new updates off and on. You have to find the project Github repository to know more about the project.
The study of the economics of crypto tokens or cryptocurrencies is called tokenomics. You must read the complete detail about the coin distribution like how much coins they offered publically & how much much coins they stake etc.
It means how much money has been invested in a project till now. You must consider this aspect too while investing in a project.
That’s also an important point to consider before investing. Coin with unlimited supply or trillion of supply is not good. Choose a coin that has a limited supply and it has mentioned its circulating supply and total supply.
Technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Charts represent human psychology like where most of the selling is made by the investors as well as the buying.
There are many ways to read a chart. We will discuss some famous patterns and indicators which are most common in use.
- Exponential Moving Averages (EMA)
- Relative Strength Index (RSI)
- Support & Resistance
- Ascending Triangle
- Descending Triangle
- Bull Flag
- Bear Flag
- Best Time To Buy Alts Coin
- Price Discovery
Things You Need To Know
Indicator: Indicators are a set of tools applied to a trading chart that helps make the market more clear
Patterns: It is different from indicators. You have to recognize the pattern yourself by drawing lines or other stuff.
Now we are ready to discuss. Let’s go.
Exponential Moving Averages (EMA)
It’s an indicator used to track the price over time. Mostly, it is used by an intra-day trader in a shorter time frame. Best to know about supports & resistances on a chart. We will recommend you to use 4 EMA with 21,55,100 & 200 values respectively.
Relative Strength Index (RSI)
It’s an indicator used to know about the over-bought & over-sold condition. We will recommend using the RSI value to 14. The RSI oscillates between zero and 100. RSI is considered overbought when its value reaches above 70 as well as considered oversold when the value reaches below 30. Sell on over-bought & buy on over-sold that’s the technique most investors follow.
Support & Resistance
It’s the most commonly used pattern by all investors. You can calculate support & resistance in a chart by visualizing it and drawing lines on a chart or you can use an indicator known as FIB Retracement to calculate the local support and resistance. Every time frame has its local support and resistance.
It is a pattern created by price moves that allow for a horizontal line to be drawn along the swing highs, and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
It is a pattern on a chart where price continuously gets down. A descending triangle is a bearish chart pattern used in technical analysis. It is exactly the opposite of ascending triangle in the way it forms on a chart.
Bull flag is a pattern form on a chart that is considered a good sign to take entry for a trade. Usually, most of the time coin value goes up when a breakout happens in that situation.
Bear flag is a pattern form on a chart that is considered a bad sign to take an entry into the trade. Most of the time, coin value goes down when a breakout happens in that situation.
Best Time To Buy Alts Coin
Do you want to know the best time to buy a coin?
It’s good to take an entry when a long continuous bearish trend broke. See the chart below to know more.
According to our point-of-view see the chart on a 1-day time frame when the breakout happens it must close the daily candle above the bearish trend line. You can also take an entry when it makes a re-test to the bearish trend line to make your entry more secure.
It’s our suggestion but you have to DYOR.
When a coin breaks its all-time high and continues to move upward then we can say that a coin is in price discovery. Here comes a risky trade no one knows about its peak from where it takes its correction.