Deciding whether to buy or sell cryptocurrencies requiresthe ability to perform sound analysis. That is, it is important not to makeyour decisions arbitrarily or randomly, otherwise you will be increasing yourrisk. If you're looking to learn about cryptocurrencies, knowing how to analyzethem critically is vital.
To help you make decisions in a more systematic way, we atVoltcoins are here to explain some of the top indicators, both fundamental andtechnical, that you can use to help guide you in the process. However, it isimportant to ensure you are buying and selling with a reliable and legitimateplatform like ours.
Let us begin with thefundamental indicators:
- Keep an eye on monetary policy decisions bythe Federal Reserve. The Federal Reserveusually sets the tone for the movements of the dollar, and thus all assets thatare priced in USD, including Bitcoin and others. If you aim to learn aboutcryptocurrencies, understanding how these monetary decisions affect the marketis crucial.
A hawkish tone (where the Fedintends to raise rates) indicates that cryptocurrencies are likely to declinein value, whereas a dovish tone (where the Fed intends to lower rates)indicates that cryptocurrency prices are likely to appreciate in value.
- Pay attention to crypto halving events. Cryptocurrency "halving" events, a programmedfeature in some cryptocurrencies like Bitcoin and Litecoin, refer to thereduction in the rate at which new units of a cryptocurrency are created. Theseevents provide an excellent opportunity to learn about cryptocurrencies, theirinherent structures, and market dynamics.
The impact of these events onthe price of the cryptocurrency is often linked to supply and demand dynamics,speculative behavior, miner profitability, and market sentiment. If demandstays constant but supply decreases, the price may increase. Moreover, cryptobuyers often anticipate a price increase during ahalving event and buy the cryptocurrency, which can drive up the price but alsolead to volatility.
There are also technicalindicators you can use to help you make decisions:
- Moving averages. As the name indicates, a moving average is a line thatshows the average price for the previous 50 or 200 days (or any other periodyou choose), and it helps smooth out price fluctuations to see the longer-termtrend. You can make decisions based on moving averages by waiting to see across over between two averages (such as the 20 and the 50 averages) to detectchanges in market direction.
- Oscillators. The oscillators category includes many indicators that usuallyoscillate between two bounds, an upper and a lower one. When the priceapproaches the upper bound, it can mean that it is overbought, whereas if itapproaches the lower bound, it means the price is oversold. The relativestrength index, stochastics, and MACD are all oscillators, and they can helpyou make better decisions when you want to buy or sell crypto.
- Bollinger bands. These bands appear on the chart above and below theprice, and they represent a number of standard deviations from the average,which is also displayed. When the price approaches one of the bands, it meansit is overstretched and may soon reverse.
It is also worth noting, as part of your journey to learnabout cryptocurrencies, that most cryptocurrencies move in correlation to oneanother to some degree, which means that if you can predict the movement of onecryptocurrency, you can predict the movement of many other cryptocurrencies.
There are several tools and indicators that can guide you inyour decision-making process when it comes to cryptocurrencies. Make sure youpay attention to them, use a good platform like the technology that we atVoltcoins offer, and manage risk along the way to ensure the best outcomes.