Crypto Market Analysis: Understanding Trends and Predictions

Crypto Market Analysis: Understanding Trends and Predictions
Crypto Market Analysis: Understanding Trends and Predictions

Crypto trading is all about making smart investment choices, or you will lose much money. This article discusses how to understand the trends and predictions of the Crypto market. 


When investing and dealing in Cryptocurrency, you can do many different things, from HODLing to day trading. 


But if you want to make money, only one thing matters: buy low and sell high. 


Of course, this is easier said than done. We’d all be rich if it wasn’t. 


Methods of Market Analysis

It is challenging to forecast when the lows and highs will occur, and doing so with any degree of precision is impossible because no one can fully predict the future.


But, crypto traders and investors often use specific market research methods to help them decide when to buy and sell. 


There are some basic methods. Crypto traders engage to be able to predict with a reasonable level of certainty when best to buy and sell in the Crypto space. 


Each Crypto market analysis method has flaws, but using them correctly can help you make better trades. They are;

  1. Technical analysis 
  2. Fundamental analysis
  3. Sentimental analysis 


Technical Analysis 

In Crypto market analysis, technical analysis is based on the idea that things tend to happen repeatedly. 


It focuses mainly on historical market data, like trade volume and price trends from the past, rather than what a coin or project does. 


Analysis of this data is used to understand better how people feel about the market by looking for patterns of behavior that keep happening. 


This can help you guess when the market will be bearish (trending down) or positive (trending up). 


In theory, these predictions should let you buy when the market price is low and sell when it is high. This way, you can make a profit.


This type of analysis is based on the idea that market prices don’t fluctuate randomly and that established trends will continue. 


Technical analysis focuses solely on the relationship between supply and demand and the price of a coin, even if there are many possible explanations for price fluctuations. 


If a coin forms a trend, proponents of technical analysis assume it will continue in that direction. 


Therefore, if the market is bullish for an extended period, demand will cause the supply of coins for sale to decrease, causing the price to rise. 


At some point, as the price rises, the sentiment will turn pessimistic as investors sell their coins to cash in. 


Supply exceeds demand as they sell off inventory, and the price falls. This never-ending loop persists.


If you use Technical analysis, it can level up how you analyze the market. 

You can’t tell what will happen in the future just by looking at the past, so there are several things to consider. 


Technical analysts who are experts rarely use this method of analysis in Isolation; they also look for other influencing factors to inform their investment decisions.


Analyse fondamentale

Fundamental analysis looks more at the bigger picture than technical analysis does. 


This method of Crypto market analysis tries to get a complete picture of an asset’s actual value by considering as many qualitative and quantitative factors as possible. 


If the actual value of something is less than its current market price, you can trade it that way and, in theory, make money. 


Also, if you think the asset is overpriced, you can trade it to make money when the price of the asset goes down. This is called “going short.”


Fundamental analysis is not just for analyzing cryptocurrencies. It is also helpful for all kinds of business. 


But when using this analysis for Cryptocurrency, you use it differently from how it is used for regular businesses. 


Cryptocurrencies are not the same as companies. They need to make their business reports public. 


Because of this, it’s hard for traders to figure out how much Cryptocurrency is worth based on future cash flows like they can for other assets.


To figure out a cryptocurrency’s potential and the strength of the group on the network, you need to look at other factors. There are things to consider, like the future and what makes that crypto coin unique. 


In your analysis, you should also consider transaction volume and user activity to measure consumer demand and store uptake. 


Furthermore, significant changes in the economy worldwide can significantly affect the prices of cryptocurrencies. 


When using fundamental analysis as part of a trading plan, it’s essential to consider these economic changes. 


This is true for both planned and unplanned events. A well-known and vital crypto-related event, like the halving, apparently affects the rate at which the coin will be created. 


You can think about this and include it in your plans and models. Also, something that wasn’t planned could have an even more significant effect.


Sentimental analysis 

Traders use this method of Crypto market analysis to measure the state of key participants in the market efficiently. These key actors include journalists, influencers, and regular consumers. 


Here, the guiding principle is that numbers don’t always tell the whole picture and that public perception and expectations can help predict sudden shifts in behavior like a buying frenzy or a panicked sale.


The trick with using these crypto market analysis methods is that as a trader, you will be more successful when you use these methods alongside each other and not in Isolation.

Ways Crypto Market Trends Can Be Analyzed

Aside from the major methods of market analysis, which are the technical, fundamental, and sentimental analysis discussed above, here are some other ways you can analyze Crypto Market trends:


  1. Candlestick Charts 
  2. Resistance and support levels


Candlestick Charts

Traders in the cryptocurrency market have access to charts that allow them to observe and evaluate market patterns. 


Cryptocurrency candlestick charts provide more data than bar charts because of the unique shape of each candle.


Like line and bar graphs, crypto candlestick charts show time on the left side and secret information on the right. 


The main difference is that candlesticks show whether and how much a market’s price went up or down during a specific time period.


Charts of the crypto market can be set to different times, shown by candlesticks. 


For example, if a crypto trading chart is set to a four-hour timeframe, each candlestick will show trading action for four hours. 


A trader’s trading period relies on their style and strategy.


A candlestick consists mainly of a base and wicks for lighting candles. 


Each candlestick’s “body” shows the range of prices that cryptocurrency traded between its opening and closing prices. 


The “wicks,” on the other hand, show the range of prices the cryptocurrency traded at above and below its opening and closing prices, respectively.


For instance, a long wick at the top of a candle’s body could mean that traders are taking gains and that a sell-off could happen soon. 


On the other hand, a long wick at the bottom could mean that traders buy the product every time the price goes down.


In the same way, a candlestick where the body takes up almost all of the room and the wicks are very short may mean that there is a strong bullish or strong bearish sentiment, depending on what color it is. 


On the other hand, a lamp with almost nobody and long wicks shows that both buyers and sellers are in charge.


Candlesticks come in either green or red and are often available in both. Green candles represent price increases and decreases by red ones over the period under review.


Despite their seeming simplicity, candlesticks can provide consumers with a wealth of data. For instance, technical analysts may utilize candlestick patterns to forecast when a trend may reverse. 


Bearish and bullish candlestick patterns are important for cryptocurrency traders to recognize.


Resistance and Support Levels 

Support and resistance levels, which can be found with the help of trendlines, make it easier to read live crypto candlestick charts. 


When you connect a set of prices on a chart, you can make a trendline.


Support levels are prices at which coins or any other asset will likely stop falling because many people want to buy at that level. 


Resistance levels are price points where a lot of people want to sell. It is hard to get past them because so many people buy and sell at these levels.


Trendlines can indicate support and resistance levels, making it easier to spot Crypto chart patterns. 


A cryptocurrency’s lowest and second-lowest lows are used to build an uptrend line in a certain timeframe. Support is considered to be levels that touch this trendline.


A downtrend line is formed using the cryptocurrency’s highest and second-highest highs, and levels touching this line are considered resistance. 


As the name implies, Downtrend lines are utilized during downtrends, whereas uptrend lines are used during uptrends. 


Various tactics based on trendlines and support and resistance levels can be applied. 


Some technical analysts, for example, simply buy around the support of uptrend lines and sell near the resistance of downtrend lines.


Final Thoughts

Cryptocurrency investing is an excellent way to diversify investments, but determining how to analyze the crypto market to know when to invest and when not to can be difficult. 


To make an informed investment decision, it is necessary to use your knowledge of how to analyze Crypto market trends.