Cryptocurrency Transactions Using Technology and Basic Analysis

As most market participants know, there are two main types of analyses that traders use to monitor the market and provide more detailed trading ideas. Technical analysis and basic analysis are key areas of research available in all markets, including new markets such as "cryptocurrency."

Basic analysis

This general analysis is the study of everything that can affect the value of an asset, from economic factors to political and social factors. Essentially, the underlying trader will try to figure out the reason for demand and supply as to why cryptocurrencies are rising or falling, which will cause prices to fluctuate.

Determining the true value of a relatively innovative asset, such as Bitcoin, can be trickier because economic data, figures, and earnings results are less appropriate for analysis than when calculating the value of a stock or currency. Bitcoin does not generate revenue or revenue figures, so it can be difficult to derive accurate value.

Supply and demand are important

Bitcoin is under control. That is, the number of coins mined is limited to a maximum of 21 million. Considering accidental loss and deliberate destruction, the actual units in circulation are much smaller. Thus, the new rate of supply is determined by the Bitcoin protocol, which is in sharp contrast to the current legal currency system, which allows central banks to print whatever they want.

There are numerous variables that affect Bitcoin demand, such as adoption, trading and trading activity, and hash rates. Bitcoin adoption sharply increased in the second half of 2020 as eBay and PayPal agreed to accept cryptocurrencies. Similarly, transactions have soared recently and you can track important market participants such as Bitcoin Whale's activity.

Technical analysis

Traders use technical analysis to look at Bitcoin's price fluctuation patterns and trends and determine future price action. The same principles apply when evaluating signals and indicators to identify price targets, support, and resistance, as do currencies and indices.

Potential Entry Level

The cryptocurrency was pushed into uncharted territory as Bitcoin hit an all-time high of over $20,000 in December 2020. The break above the previous record price printed in 2017 means that along with this fast movement, some well-known momentum indicators, such as Relative Strength Index (RSI) and Stocastick, are less useful because they are more effective in range-limited markets. In the words of the legendary economist, the indicator can remain overbought longer than the seller can maintain their solvency.

There are no 'high lows' or 'low lows' that can be called support/resistance or a target beyond the current price when the market surges above or below the previous record price. However, traders can determine the most appropriate price range by referring to the revert and expansion based on the classic 23.6%, 38.2%, and 61.8% Fibonacci levels. For example, determining more upside capacity using the Fibre extension will provide a 38.2% shift from the March low to the November high. Conversely, the reversion is resolved by connecting the low and high points to obtain a lower level of support than the current price.

Disclaimer

Cryptocurrency Has High Market Risks And Volatility Despite Its High Growth Potential. It is strongly recommended that users investigate and invest at their own risk. BitMart will do its best to list only high-quality coins, but will not be responsible for any investment losses.

All content produced by BitMart is for educational purposes only. This should not be taken as financial or investment advice. Individuals may be highly volatile, so it is recommended that due diligence be carried out before purchasing cryptocurrency.