Modules for Personal Finance
Investing in cryptocurrencies
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Technical and fundamental investing: do these concepts work in cyptocurrency world?
One well-known cryptocurrency is Bitcoin. To invest in it, you must first learn about crypto's technical analysis. After all, trading cryptocurrency without crypto analysis is a risky guessing game!
Why Should Bitcoin Be the First Cryptocurrency for Beginners
- It might be difficult to distinguish between trustworthy and untrustworthy cryptocurrencies if you are new to the world of blockchain and cryptocurrency.
- Several cryptocurrencies known as "meme coins," have sprouted up in recent months, costing novice investors a significant portion of their capital.
- Bitcoin, on the other hand, is a considerably safer cryptocurrency to invest in. It is the world's first deflationary crypto asset, and it just hit an all-time high.
Here are some more compelling reasons to believe in Bitcoin:
- Cryptocurrency with the most decentralization
- A deflationary token is a token that represents a reduction in the value
- A whitepaper that is freely accessible to the public.
- Mechanism of Proof of Work
- Tokenomics that are very clear
An Overview of Crypto Technical Analysis
There are two types of Bitcoin investors in the larger scheme of things:
- HODLers — People who purchase Bitcoin with the purpose of holding it for a long time.
- Traders - People who purchase Bitcoin with the intention of immediately selling it for a profit. If you want to invest in Bitcoin to increase your money quicker than conventional techniques, you'll need to brush up on your crypto technical analysis abilities.
Technical analysis analyses charts and forecasts future price movements using the notion of historical price patterns and technical indicators. This holds true for any market, including cryptocurrencies.
Crypto technical analysis may help you predict the lows and highs of prices across different time periods. These projections will help you make well-informed, data-driven decisions about when to buy crypto and when to sell it for a profit.
Using Crypto Technical Analysis Indicators to Get Started
To begin with technical analysis, you'll need a platform that offers dependable and sophisticated tools. For novices, here are two indications to start with:
- Moving Average Weighted
The MAW is a statistic that is used to gauge the market's overall attitude. The incidence of the short, mid, and long-term moving averages is investigated in terms of price fluctuations. The moving average is calculated by averaging the data points over a specified time period.
- Relative Strength Index
The RSI (Relative Strength Index) is a momentum indicator. It compares the quantity of current rises to prior downturns to determine the speed and change of price changes. The general belief is that for buying, the RSI should be less than 30 and for selling, it should be more than 70.
This momentum indicator is created using the ADX algorithm. While ADX may help you delve into the micro, Williams Fractal is a great way to obtain a quick macro view of momentum patterns. The strength of an asset's upward and downward price movement is shown by this oscillating indicator.
Crypto Technical Analysis vs. Crypto Fundamental Analysis
Crypto fundamental analysis is based on the premise that fundamental variables like a company's performance, management, and market size impact an asset's price. Crypto technical analysis, on the other hand, ignores all economic and structural aspects. It concentrates only on the chart and indicators such as the MACD, RSI and candlestick patterns.
Issues with Crypto Fundamental Analysis
Cryptocurrency networks can't be judged in the same way that regular enterprises can. More decentralized offers are more akin to commodities. Traditional FA indicators can't tell us anything about more centralized cryptocurrencies. As a consequence, we must focus on a number of frameworks. Identifying good metrics is the first step in this approach. We mean powerful in the sense that they can't be readily manipulated. For example, it's simple to establish false profiles or purchase participation on social media, so Twitter followers or Reddit users are generally not useful indicators.
It's vital to remember that no one metric can provide us with a complete picture of the network we're evaluating. We can observe that the number of active addresses on a blockchain has been steadily expanding. However, it doesn't tell us anything on its own. For all we know, there may be a single perpetrator sending money to themself using different addresses each time.
To summarize, crypto trading is an interesting business in which many individuals want to participate. However, before you begin trading, you must first have a thorough understanding of the crypto market.
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