Cryptocurrencies are intrinsically volatile, which signifies frequent fluctuation of their value based on numerous factors that affect the crypto market.
However, there are feasible ways to anticipate certain market fluctuations or market tendencies to strategize and prepare for either a bullish or bearish moment in the crypto industry, which can determine the perfect entry to buy bitcoin, ETH, LTC, or other cryptocurrencies.
In this article, you will discover how it is possible to forecast the value of cryptocurrency.
How to Prognose the Price of Cryptocurrency – Graphic and Chart Assessment
If you have already followed any crypto-financial analysis, you may have noticed that they feature several charts showing the performance of major cryptocurrencies compare with fiat currency (e.g., BTC vs US dollar).
At first, these charts may be perceived as meaningless lines frequently changing, but the data behind them tells a story about how recent events in the crypto market have affected the price of digital assets.
Hence, based on data and understanding how certain events led to specific reactions in the crypto market, it is possible to determine what can happen next.
In fact, the first forms of financial analysis appeared in Asia in the 18th century, when they were used to chart changes in the price of rice.
Nowadays, financial analysis utilizing graphics and charts is vital for investors and traders, as it aids them to know the best time to purchase, sell or hold a certain digital asset.
How to Prognose the Price of Cryptocurrency – Distinct Analytical Proceedings
Currently, there are 3 main kinds of analysis in the financial investment scenario- technical analysis, fundamental analysis, & sentiment analysis.
While technology has made these tools more manageable and easier to use, they have been the “compass” traders & investors utilize to navigate through the financial world for several decades.
Technical Analysis
The technical analysis encompasses discovering statistical trends depending on chronological activity, such as examining price movements & other dynamic indicators, like turnover ratios, profit ratios, etc.
Generally, this sort of assessment follows a philosophy, in which prices follow trends & then history repeats itself over and over again. Hence, analysts use historical data to forecast whether an asset’s value will upsurge or decrease in the near future.
Nonetheless, technical analysis is not an exact science. Instead, it is more like predicting the weather, which means price forecasts based on this method may not be absolutely sure.
Fundamental Analysis
On the other hand, the fundamental analysis process takes a different methodology.
Instead of considering where the expenses are going, an expert using fundamental analysis will observe the factors that determine the numbers – like the economy or how a company is being managed – to determine the value of an asset.
One of the main advantages of using fundamental analysis is that this method removes the emotion of the process, following a philosophy that believes the market may have underestimated or overestimated the value of an asset, and a correction will eventually occur.
Sentiment Analysis
Differently, sentiment analysis is based on other parameters, including the market sentiment around a certain asset as provided by journalists, influencers, and average consumers/investors.
In essence, the philosophy behind the method of sentiment analysis is that data does not always tell investors the whole story. Hence, trends such as panic selling or a buying spree can be detected ahead based on the public’s perceptions and expectations.
Are There Any Tools to Prognose the Price of Cryptocurrency?
Regardless of the method used when structuring a financial analysis, there are several complexities involved in the process of predicting the price of a cryptocurrency.
Nowadays, some tools facilitate the task of forecasting cryptocurrency prices, which includes charting tools that allow investors/traders to visualize different indicators and trend lines to produce crypto market forecasts.
Many investors/traders in the crypto industry utilize automated charting tools to stay ahead of the curve, as it is uncanny to see the average crypto enthusiast interested in technical analysis or graphic/chart financial assessments.
Platforms such as TradingView and Cryptowat.ch are among the favorite charting tools used by pro-level investors/traders to forecast the price of digital assets.
Additionally, it is crucial to associate these tools with reliable market data (e.g., Coinmarketcap), network statistics (e.g., CryptoMiso), research reports (e.g., Crypto Research Report), and information obtained in news websites.
Final Thoughts
The volatile nature of cryptocurrencies is a concern among many investors, given that in case the risk associated with an investment is not predicted, there is a chance of exposition to excessive risks or even monetary loss.
In this sense, knowing how to use technical analysis and associating these methods with other tools such as charting tools and market data dashboards is crucial to increase the chances of success when predicting the price of digital assets.
