At the heart of owning bitcoin- an investment in the cryptocurrency market- is the desire to increase the value of your investment. Undeniably, this calls for the full knowledge of market patterns, knowing when to buy bitcoins, when to hold and when to sell while maintaining an upward trajectory in the value of your bitcoin investment.
For an average beginner in Bitcoins, how exactly do you analyze market trends and in what way does each trend affect the bitcoin price?
The two major methods
Prediction in exchange markets is a game of calculated prophecy. And like a majority of prophets, none is right 100 percent of the time. Many Bitcoin investors and traders have lost their money with others losing their life savings in this attempt.
Successful traders have a 2 approaches to predicting the rise and fall in the price of Bitcoins. These are:
- Technical analysis
- Fundamental analysis
The use of these 2 analysis methods in the cryptocurrency market is key to ensuring you have a better idea of trends, possible rises, and falls in the bitcoin price. Let’s take a closer look at these methods.
In finance and accounting, practice involves the analysis of a business’s financial statement to determine how financially sound the business is. Its application to cryptocurrency and futures trading involves taking a closer look at the role of demand and supply in the market.
Factors that affect this balance include government policies from around the world, the levels of transaction activity in the market and increased or decreased user absorption of the cryptocurrency.
Just like traditional money, user adoption is key for bitcoin to be perceived and considered as a medium of exchange and a store of value. The larger the circle of users, the more viable the cryptocurrency is in the long term.
The supply of bitcoins has been pegged at a maximum of 21 million coins with each coin divided into a hundred million pieces. Unlike modern monetary supply, Bitcoins cannot be printed by a bank. Always Keep an ear down for the release of any dead bitcoins as they have a definite impact on the bitcoin price.
The importance of macroeconomic events cannot be understated. Major events in the ‘real” world such as hacks or the existence of a scaling dilemma work against the bitcoin prices. According to Tim Enneking, chairman of Crypto Asset Management, “The events that impacted bitcoin prices the most were non-bitcoin events like Cyprus and Greece.”
This is the close study of bitcoin price charts to determine the trend taken by a particular cryptocurrency. Charts offer a quick overview of the bitcoin prices and trading patterns at any given time. Learn to interpret candlestick charts to get a better idea of the behavior exhibited by the cryptocurrency market at a given period of time.
One of the most prevalent concepts in technical price analysis is the trend channel. These are straight boundary lines indicating the long-term price trends of a particular cryptocurrency.
Now that you have a quick overview of what to look out for in your bitcoin trading, start following and analyzing the development of bitcoin and bitcoin prices and take a dip into the deep end of cryptocurrency trading.