Cryptocurrency Fundamentals: Essential analysis techniques for encryption investors
The cryptocurrency world has exploded in popularity in the last decade, with new coins and tokens launched every month. However, as the market grows, the same is true of the need for informed decision making. As an encryption investor, it is essential to have a solid understanding of fundamental analysis techniques to make informed investment decisions.
** What are fundamental analysis techniques?
Fundamental analysis is the process of analyzing finances, management team, industry trends, and a company’s competitive scenario to predict its future performance. In the context of cryptocurrency, a fundamental analysis involves the assessment of market, currency or token, as well as their underlying technology and development.
Key concepts for analysis of cryptocurrency fundamentals
Before you dive into the technical analysis, here are some -chave concepts to understand:
- Market capitalization
: The total value of all pending currencies or tokens in a specific cryptocurrency.
- Supply and Demand : the balance between buyers and salespeople who boost the price of a cryptocurrency.
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Technical Analysis Techniques for Cryptocurrency Fundamentals
To support the fundamental analysis, you will need to understand the technical indicators that provide information on the price movement standards of a coin or token. Here are some essential techniques:
- Mobile Averages (MA) : A line chart that plots prices in different periods of time to identify trends and predict future price movements.
- Relative Strength Index (RSI)
: An indicator of a moment that measures the speed and change of price movements, providing an idea of whether a currency or token is excessive or super sold.
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- Support and resistance levels : Price ranges where buyers and sellers are more likely to enter the market, influencing price movements.
- Candle patterns : Visual indicators used in technical analysis to predict price movements based on opening and closing price.
Example: Fundamental Bitcoin Analysis
For example, let’s look at Bitcoin’s fundamentals:
- Market capitalization: about US $ 1 trillion
- Supply: 21 million coins
- Blockchain development: decentralized, open source and widely supported by developers
- Regulatory environment: regulations that govern the government that govern cryptocurrency transactions in many countries
- Cryptocurrency Mining: Work Proof Consensus Algorithm (Pow)
Using these fundamental analysis techniques, we can identify possible purchase opportunities when the market is overlapping or predicting a strong upward trend when supply is increasing and demand is high. On the other hand, we can sell coins or tokens during periods of high volatility or uncertain regulatory.
Best practices for fundamental cryptocurrency analysis
- Be updated : Monitor market trends regularly, news and regulatory updates to ensure accuracy.
- Use multiple indicators : Combine technical analyzes with fundamental analysis to obtain a broader understanding of currency performance.
- Diversify your portfolio : Spread investments in multiple coins or tokens to minimize risk.
- Set losses and profits to take : limit potential losses, setting clear goals and using stop-lid and profits.
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