Major Cryptocurrency Market Analysis Methods

  • Andrew Strogoff

    Cryptocurrencies’ analysis methods, technical and fundamental forecasting, how to combine both methods

Major Cryptocurrency Market Analysis Methods
You may also like:

When you trade this or that coin, you need to take an important decision whether to buy it or to sell. You can either guess future price direction or forecast it using one of two (or both of them) analysis methods. This trading guide being a part of our education course is related to Technical and Fundamental forecasting methods that are widely practiced by professional traders.

Technical analysis

This type of market analysis involves trading charts. Traders, using this method, work with different timeframes and tools in order to make a forecast of future price fluctuations. Technical analysis is the simplest one as traders don’t need to have special knowledge in economics.

This forecasting method was initially developed for stock markets in the US by financial journalist Charles Dow. He has noticed three main chart features that form the basis of technical analysis. Here they are:

  1. Fluctuations have repeatable nature meaning the situation that took place earlier, may repeat in future.
  2. The price includes everything meaning quotes comprise all political and economic events already.
  3. Prices have tendencies meaning all fluctuations have a certain direction on different timeframes.

Why do many traders prefer to work with technical analysis? This method of quotation forecasting is truly the easiest one. All the information can be read on charts. Some traders believe that you don’t need even to look for the events that are price drivers as they are all included in final asset’s cost.

The other reason why this forecasting method is very popular – it offers plenty of trading tools such as patterns, indicators, as well as different theories helping traders to find entry points.

Technical analysis is self-sufficient as it may be used without any other trading techniques in order to analyze the markets. Some professional traders have never used Fundamental method to predict fluctuations.

Technical analysis is truly a cross-market method as you can use it trading stocks, Forex currency pairs, cryptos as well as all types of derivatives.

👉MUST READ Bitcoin (BTC) Transaction Fees Continue Declining Despite Trading Volumes Being on the Rise
Bitcoin (BTC) Transaction Fees Continue Declining Despite Trading Volumes Being on the Rise

Trend and counter-trend trading

The main task of every trader and investor when dealing with financial markets in general and cryptocurrency, in particular, is to define trends. There are two global approaches to work with them. Most traders try to find tendencies and to open positions along them.

The second approach is to define a trend and to trade in the opposite direction (during corrections of reversal periods). Both of those methods are vital and useful. However, the second one is mostly used by professional traders as it is more difficult to place orders catching price corrections or trying to find reversal points.

Both trend and counter trend methods require knowledge in Technical analysis meaning you need to be able to find a tendency at least.

Let’s take a look at BTC/USD chart. For beginner traders, the “naked” price chart looks like that. They see just price fluctuations and nothing more. They can earn here by placing orders randomly and sometimes they win. However, successful trading means having a positive balance in the long term. You need to understand that you will not be able to close all your trades with profit as there is no 100 percent iron-clad trading strategies. However, you can increase your chances significantly by using technical analysis at least.

Let’s have a look at the same chart but this time, we have drawn a line, which is called a trend line. We have added just one graphics tool and the situation on the chart looks much more understandable. What can we say about all those price fluctuations?

The currency pair (BTC/USD) has a downtrend first. The price fluctuates most of the time below it but returns sometimes to test it as buyers are trying all the time to change the balance. How to use this information?

You can use opportunities when the price reaches the trend line from below to sell, or find entry points at the beginning of corrections (when the price goes upwards) in order to buy doing countertrend strategies.

This is just a simple example of how technical analysis works. We are going to tell you more about it in our special guide, related to this forecasting method.

👉MUST READ Bitcoin Trading For Beginners: Trade Bitcoin Like a Profi
Bitcoin Trading For Beginners: Trade Bitcoin Like a Profi

Fundamental analysis

Another way to forecast cryptocurrencies’ price fluctuations is to use the fundamental method of quotes’ prediction. This technique is more complicated as it requires skills, knowledge and experience. Classical Fundamental analysis is based on economic, political events as well as inner companies’ data (when is used for stocks).

As for cryptocurrencies, this method studies project and technology behind any coin as well as the general situation on the crypto market. Fundamental analysis should be applied for a long-term period as it is impossible to see its impact in one hour or even one day.

For example, we have a new coin, which is in pre-ICO period currently. We need to understand whether it is promising or not. However, inner project analysis is not the only way to examine the price. You also need to understand the global picture of the cryptocurrency industry.

There are some events that may provoke significant price changes. When China banned ICOs in 2017, cryptos went downwards as investors feared the next steps from China’s government. In addition, cryptocurrencies are very popular in China and such steps make local investors get rid of cryptos.

However, you should understand that it makes no sense to analyze coins for longer time periods as this market is very flexible and fluid. The perspectives of most coins are still underestimated. The majority of projects are still in progress meaning they have conducted ICOs already but are far from being implemented or are in beta testing mode.

The main postulates of the Fundamental analysis are the following:

  1. All price changes result from certain reasons meaning all traders and investors are taking decisions relying on some aspects that may according to their opinion, provoke any trend.
  2. One can find the reasons for price fluctuations when conducting a detailed study of facts related to a certain asset.
  3. Every event that happened is going on right now or is planned for future will be the reason for some consequences that may affect quotes changes.
  4. If one knows all the facts that are likely to have an impact on prices and do the right logical deduction, he can forecast the future of an asset.

All those postulates are actual not only for stocks and Forex but for cryptocurrencies as well. However, Fundamental analysis of cryptos have some features that distinguish it from Fundamental analysis of other markets. Here they are:

  1. Cryptocurrencies have traits of both stocks and currencies as they are part of different projects. Nowadays all cryptos are developed as kind of assets that project team gives to investors in change of fiat money or other cryptocurrencies. Those coins enter exchanges later and may be bought there.
  2. This industry is decentralized. There is no authority to regulate the market. Every project establishes its own rules of the game (the total amount of emission, type of consensus mechanism etc).
  3. Cryptocurrencies are still far from full integration into real economics meaning they are not widely used by businesses and customers to conduct transactions and pay for goods and services.
  4. Coins have no physical incarnation as compared to fiat currencies and stocks.

“Wars” between the adepts

There is a true “Holy War” between those who practice technical analysis and conduct the fundamental method of quotes forecasting. The first try to prove that their approach is better and the only right to predict prices. The second says that it is impossible to understand future fluctuations without learning fundamental basics.

If you read several forums related to trading and investing, you will obviously find users arguing with each other trying to persuade the opponents in their rightness. This “Holy War” began long ago with the appearance of margin trading and still continues as nor “technicians” neither “fundamental” adepts are able to win. Here are some arguments that both sides use in their disputes:

  1. Technical analysis is illustrative as you can see all the necessary information on the chart. Fundamental forecasting method cannot be “seen” or “touched.”
  2. You need no events to predict the quotes as all of them are already included in the price.

However, those who prefer Fundamental analysis say that you will not have the complete picture of any market you choose if you avoid looking for important events and take them into account when trading.

Both sides have their reason and both of them are right as Technical analysis method is as important as Fundamental one.

👉MUST READ Top 7 Best Bitcoin Trading Bots in 2018
Top 7 Best Bitcoin Trading Bots in 2018

Combining both forecasting methods

The best way is to use Fundamental forecasting along with Technical especially when you deal with cryptocurrencies. Why is it important to practice both of them? First, the cryptocurrency industry is not regulated.

There are many scam coins that you can detect using Fundamental analysis. They are not worth trading at all as they have no perspectives in future. Can you find such cryptos using traditional technical analysis? Certainly, you don’t even have a single chance to succeed.

Combining both methods is important for traders and long-term investors as they can see the promises behind this or that project and apply them on charts with indicators or graphics tools in order to see whether they coincide or not.

How to apply those analysis types when trading? When you deal with any new coin, you need first to learn more about the project and its perspectives. To do this, you have a wide range of tools including White Paper document, website information, project team and Roadmap. When a coin passes this first “scam test” you can go on with analysis examining charts.

Professional traders and investors always combine both methods attempting to get better results. This approach is more difficult as you have to gather much more information in this case. Apart from chart data that you need to examine carefully, you are to look through general situation in the crypto industry along with penetrating into coin’s background.

Why is it better to combine those forecasting techniques?

  1. The complete picture of the market. Sometimes it is better to know the drivers along with studying charts.
  2. Confirmation. Using both techniques you will be able to confirm your trading signals. It is easier to take decisions when analysis results coincide.
  3. Flexibility. The more tools you use to find entry points, the more flexible your trading strategy is.

This article gives the basics of both analysis methods. We are going to describe them in our next posts. You will learn more on types of Technical analysis and several practical recommendations on fundamental method.

Cover image via
Only the most important posts per day. Infographics, analytics, reviews & summaries. Follow us on Facebook!
👓 Recommended articles

Bitstamp Review: Cryptocurrency Exchange For All Types Of Traders

  • Andrew Strogoff
    ⭐ Features

    Bitstamp is a very tough player of the crypto exchange industry, offering many features to its clients

Bitstamp Review: Cryptocurrency Exchange For All Types Of Traders
You may also like:

trading platform

Hello, mates. I know that many of you are looking for a trading place where you can buy and sell both cryptos and fiat money. This review is related to Bitstamp cryptocurrency exchange. Here I will cover such points as registration procedure (including personal verification), trading features, conditions (including fees) and some other important aspects.

Before I start describing the main features of this trading platform, I would like to familiarize you with the company itself. Bitstamp is one of the oldest cryptocurrency marketplaces in the world. The company began its activity in 2011 in the UK. However, later they have opened other offices in Luxemburg and New York. Crypto exchange Bitstamp received its license in Luxemburg.

This marketplace is widely known within the cryptocurrency community and I would tell that this is true as you hardly can find a trader who heard nothing about it. Moreover, several famous and popular tabloids like Forbes, Coindesk, Reuters have mentioned Bitstamp in their articles. The company has established cooperation with Ripple, CACEIS and Swissquote.

This crypto exchange trading place offers English only. There are no other language options at all. However, it gathers traders from all over the world.

👉MUST READ Bitcoin Price Volatility Explained
Bitcoin Price Volatility Explained

How to create an account with Bitstamp

Before you start trading with this exchange, you need to create your account. There are no difficulties to do it, as the form is very easy. You need to fill in your name, email address and accept terms of use and Bitstamp Privacy Policy.

 account with Bitstamp

Above you can find the form that I have already filled in. After pressing on “Register” you will proceed to the second step. You will be sent an email with a confirmation link in order to end account creation procedure.

👉MUST READ How to Trade Cryptocurrencies
How to Trade Cryptocurrencies

Once you have created your account, you can proceed with its verification. Here I want to make a reservation. I think it is not a secret that there are trading platforms with no obligatory verification procedure, meaning without confirming your identity, you will be able to trade but with some limitations.

Bitstamp requires verification from all service users without any exception. Moreover, you will not be able to proceed to deposit and withdrawal step before you confirm your identity. This requirement is obligatory because the platform has a license.

Now I am going to stop on details of the verification procedure. After you have created your account, you can login and navigate to “Verify account.”

I can say that this procedure is a bit harder than creating an account as you have not only to provide your personal data, but also to provide exchange with your ID documents scans. What kind of personal information is required?

You need to provide Bitstamp with data, indicated in your ID. Additionally, you need to upload the following documents:

  1. ID photo.

  2. Proof of residence document photo (this can be your bank statement, utility bill or taxes certificate, for example).

👉MUST READ What is Trading and Cryptocurrency Trading, Their Main Features
 What is Trading and Cryptocurrency Trading, Their Main Features

How to deposit and withdraw money

Bitstamp offers the opportunity for all its clients to deposit and withdraw in both fiat currencies and cryptos. You can use, for example, VISA or MasterCard as well as SEPA (European Bank). As for cryptocurrencies, you are allowed to deposit and withdraw with Bitcoin, Litecoin, Ripple, Ethereum and others.

How to place your first order with Bitstamp, order types, trading tools

When you have already created your account and verified it, deposited some amount, you can start trading. Here, I want to make a couple of points for you to pay attention to. Bitstamp offers a high-quality trading platform with several features including professional charts and some other important.

The first thing that I have noticed when I have entered the platform for the first time was the number of currency pairs, which is lower as compared to the most of competitors. The number of pairs is slightly above 10.

order typesNow let’s get down to the trading platform. This is a very important aspect for every trader as charts allow users not only to see the current price but also to analyze it using historical data. Bitstamp offers modern full functional chart with several trading tools.

Take a look at the screenshot. You can see there candlestick chart. In the upper part of the chart, you can choose indicators and different graphic tools. As for indicators, there are many useful algorithms including the most popular Bollinger Bands, ADX, ATR and the others. Graphic tools are represented by different types of lines and other geometric patterns. Here you can find Fibonacci retracement as well.

Before you open any trade you need to choose a trading pair. This option is also available in the upper side of the platform. The next step is to choose the order type. Here I want you to pay attention to the different types of trades that are available with Bitstamp: they are the following:

  1. Instant order. The easiest one that is recommended by the exchange to beginner traders. Here you buy or sell cryptocurrency at the current market price.

  2. Market order. Is it a kind of instant order, but you can buy or sell cryptocurrencies at best prices. This order is suitable for those who have some trading skills already and want to improve their entry points.

  3. Limit order allows traders and investors to choose the price at which they will buy or sell cryptos. This one is suitable for professionals and skilled market players. The main idea of this order is to set a price at a desirable level and wait for the crypto to reach it.

  4. Stop order. This kind of trade allows users to limit their losses in case if the price goes in the opposite direction.

Once you have chosen your pair and order type, you can input the amount you want to sell or to buy and start trading. As far as you can see, there is nothing difficult here.

👉MUST READ Major Cryptocurrency Market Analysis Methods
Major Cryptocurrency Market Analysis Methods

Bitstamp fees

Almost all cryptocurrency exchanges take their fees not only for trading but also for deposit and withdrawal procedures. Trading fees at Bitstamp are diversified meaning the more you trade, the less you pay. This is a fair approach, I think as exchange earns more when you have higher month trading volumes.

As for deposit and withdrawal fees, they are taken by the company but they do not come directly to the company’s pocket as this money goes to payment systems.

The highest trading commission rate is 0.25 percent. It is taken from all those who’s monthly trading volume is below $20,000.

Security and support service

I have a good news for you. Bitstamp requires two-factor authentication since June 2018. This is a mandatory procedure, which increases the security level of your own trading account. You can use both Google Autenticator or Duo Mobile services.

👉MUST READ Cryptocurrency Trading Signals, How to Choose and to Use Them
Cryptocurrency Trading Signals, How to Choose and to Use Them

Moreover, you can switch on notifications about all the important events that take place in your trading account. Those messages will be transferred directly to your email address. This allows users to get updates on all the important events and take measures in case of any suspicious acts.

As for the support service, some users say that sometimes it takes time to receive any answer from the team. The speed of reaction is slow, but to tell the truth, I think that this is due to the inflow of investors. Bitstamp is one of many exchanges having such problems and I hope they are going to solve them in the future.

Pros and cons

This is my most preferable part of any crypto exchange review. Here I’m going to underline those pros and cons I think the most important of the company. I’m going to start with advantages. Here they are:

  1. Great working experience. Bitstamp operates since 2011. The team does not hide their members, which is a positive aspect as they are trusted by the crypto community.

  2. Bitstamp has its license and operates according to legislation. Users may be sure that their money is safe and they will not be scammed by the administration.

  3. Liquidity. This exchange has high liquidity as there are serious daily trading volumes. This means that the currency pairs are less volatile and you can use all types of orders.

  4. Several payment methods allowed. Bitstamp offers not only cryptocurrencies but also fiat money. You can deposit USD and EUR as well as withdraw them from your trading account. Credit and debit cards such as MasterCard or VISA are also available.

  5. Friendly user interface. I heard no complaints about Bitstamp’s interface from users and I found no negative testimonials about it.

👉MUST READ NEO Trading Guide For Beginners
NEO Trading Guide For Beginners

And now I’m going to share with you my negative thoughts about the exchange. They are not numerous, but I think it will be interesting for you:

  1. Verification requirements. This is not the big problem, but I think there are those who want to stay anonymous in crypto industry. Bitstamp does not allow to stay in shadow as every user has to do the verification procedure before getting access to trading.

  2. A small number of cryptocurrency pairs. It is true. You will not find any altcoins from above the top 20. However, Bitstamp offers in its turn the possibility to work with hybrid pairs including USD and other fiats. The exchange can be used as your pass into the world of altcoins as you may buy BTC or ETH here and then transfer those cryptos to other exchanges with a wider range of pairs, which do not support fiat money.

  3. Lack of localization. The website is in English only. Other languages are unavailable. I’m far from thinking that the international language is not enough for such a trading platform, but for some traders, it may be a real problem to work with the exchange.

Bitstamp overview

Before making the full stop, I would like to make a brief overview of this crypto exchange. I’m not going to give any recommendations as it is up to you to decide whether to place your investments there or to find some other trading platforms. However, I want you to pay attention to some interesting moments.

Bitstamp operates since 2011 and there were no significant security issues. This is the first thing that I have paid attention to. Bitstamp offers great opportunities for all those traders who want to use technical analysis in their trading routine as there is a large number of indicators and other important tools available.

👉MUST READ ZCash Price Prediction- How Much Will cost ZEC in 2018?
ZCash Price Prediction- How Much Will cost ZEC in 2018?

Cover image via
The fastest way to get crypto news is to follow our Twitter. You won’t miss a thing! Subscribe.
👓 Recommended articles