Posted May 06, 2024

FUNDAMENTAL AND TECHNICAL ANALYSIS IN THE CRYPTO WORLD

Fundamental and technical analysis in crypto world are two very important terms if we want closer to understand market trends in crypto, identify potential investment opportunities and avoid risks in the volatile cryptocurrency market by combining basic research and technical chart analysis.

WHAT IS FUNDAMENTAL ANALYSIS IN THE CRYPTO WORLD?

Fundamental analysis of a crypto project is a method of studying the basic characteristics and value of a project in order to assess its long-term viability, potential value and prospects for success.
 

This analytical method encompasses various aspects of the project that are used to evaluate its fundamental factors.

KEY ELEMENTS OF FUNDAMENTAL ANALYSIS

When we talk about the fundamental analysis of a crypto project, here are some key elements that are observed:
 

The team and the development team

 

The quality and experience of the team behind the project is analyzed.

History and success of the team in previous projects is studied, as well as the evaluation of their expertise and skills necessary for the success of the project.

Technology and innovation

 

Technological infrastructure and innovations offered by the project are evaluated.

Technology concept, scalability, security, uniqueness and potential impact on industry or solving real problems are studied.

Business model and strategy

 

The project’s business model and its long-term sustainability are analyzed.

This includes studying revenue sources, monetization strategies, market competition and potential advantages over other similar projects.

Market and competition

 

Size of the target market, the competition and the position of the project within the industry are examined.

Understanding the competitive advantage and positioning of a project can help assess long-term value.

Macroeconomic factors and regulation

 

Macroeconomic factors, regulatory trends, legal restrictions, geopolitical risks and other relevant factors that may affect the project are evaluated.

Partnerships and collaborations

 

The project’s partnerships, collaborations and connections with other successful projects or institutions are analyzed.

This can provide additional security and opportunities for the project.

Social impact and community

 

Impact of the project on society and community engagement is studied.

An active and supportive community can be a positive indicator of a project’s long-term success.

Financial analysis

 

An analysis of the project’s financial indicators is conducted, including total revenues, costs, profitability, financial stability and capital management.

Independent application of fundamental analysis can provide a deeper understanding of a crypto project and its underlying factors, but is not necessarily sufficient to make a final investment decision.

Fundamental analysis often serves as the basis for estimating the value of a project, but it should be supplemented with other analytical methods and factors.

TECHNICAL ANALYSIS IN CRYPTO AND WHAT IT REPRESENTS

Technical analysis in crypto in most cases is a method of studying historical prices, trading volumes and other market data in order to predict future price movements of cryptocurrencies.

It uses various tools and methods to analyze the market

KEY ELEMENTS OF TECHNICAL ANALYSIS

Here are some key elements of technical analysis in crypto:
 

Charts

 

Charts are used, such as candlestick charts or lines, to visualize the movement of cryptocurrency prices over a period of time.

They can show trends, reversals, support and resistance, and other important patterns.

Indicators

 

Technical indicators are mathematical calculations based on prices and/or trading volume.

They help analysts identify trends, potential reversals, excessive conditions, or potential buy or sell signals.

Examples include the moving average, relative strength (RSI), and the stochastic oscillator.

Candlestick Patterns

 

Technical analysis in crypto uses various candlestick patterns, such as “double tops”, “triple bottoms”, “engulfing candles” and many others, to identify possible reversals or continuations of trends.

Trends and support/resistance lines

 

It also identifies support lines (a level below which prices rarely fall) and resistance lines (a level above which prices rarely rise).

These lines can help identify potential entry or exit points.

DOES TECHNICAL ANALYSIS HAVE ITS FLAWS?

Although technical analysis can provide useful information and guidance in evaluating the crypto market, it is important to be aware of its limitations.

Here are some downsides to consider if you rely solely on technical analysis to assess the crypto market:

The Unpredictability of External Factors

 

Focusing on the study of historical data and price movements is one of the important researches that technical analysis is doing.

However, cryptocurrency markets are exposed to the influence of many external factors, including news, regulatory changes, macroeconomic events, etc.

These factors can suddenly affect the market and reverse technical trends.

Lack of Fundamental Information

 

As has been noted technical analysis does not rely on fundamental information about crypto projects, such as fundamental values, technological innovations, competition, teams, etc.

This type of information can be crucial to the long-term value of a project and cannot be fully accounted for on the basis of technical analysis alone.

Interpretation of Subjectivity

 

Interpretation of charts, indicators and patterns in technical analysis can be subjective.

Different analysts may have different views and interpretations of the same data.

This can lead to different results and trading decisions.

Information Lag

 

Technical analysis is based on historical data, and signals may take some time to appear on the charts.

This means that entering or exiting positions may be delayed, missing out on optimal trading opportunities.

Unpredictability of the Market

 

Cryptocurrency markets are known for their high volatility and unpredictability.

In such environments, technical patterns and indicators may be less reliable, because the market can react quickly to unexpected news or events.

Analoguos to that technical analysis is not without flaws and does not provide absolute predictions.

Cryptocurrency markets are highly volatile and subject to the influence of many factors, including news, regulatory changes and external events.

Therefore, combining technical analysis with fundamental analysis and general research can provide a more comprehensive approach to trading decisions in the crypto world.

This is not financial advice, the article presents a view of the current market situation. You are responsible for your own investments!

Binance

It is a popular Cryptocurrency exchange because they list more than 100 different coins. It is one of the most trusted platforms as they support multiple fiat currencies like USD, EUR, RUB, TRY etc. It has become so popular that it has stopped creation of new accounts.

Kraken

From day one, they are designed and built for newcomers and experts alike. They become one of the largest bitcoin exchanges, serving clients in over 190 countries, and continue helping people discover the world of crypto. Learn How to buy Tron.

CEX

Established in 2013, London based CEX.io is a Bitcoin exchange as well as a cloud mining providing company. The company supplies both a trading platform and brokerage services for Bitcoin, Ethereum and a range of other cryptocurrencies.

RELATED POST

Blockchain Validator

Posted May 02, 2022 Blockchain Validator Blockchain Validator A blockchain validator is a person who verifies transactions on a blockchain. Once confirmed, transactions are added...