Anna Voychek, a leading analyst at the Trust in BTC international fund (trust-in-btc.com), voiced a problem that, for sure, every participant of the cryptocurrency market was faced. Trust in BTC customers who already have experience working with traditional assets often wonder how technical analysis is applicable to the cryptocurrency market. This question is far from idle: on the one hand, the methods of technical analysis are developed in detail and have stood the test of time, on the other hand, cryptocurrency is a very young asset, the behavior of which is difficult to assess based on the usual economic categories.
According to Anna Voychek, over the years of the existence of fiat money, a sufficient amount of fundamental and technical data has accumulated that allows us to create working models that adequately describe and predict market’s behavior. In the case of cryptocurrencies such data is clearly not enough. Bitcoin, which is currently considered the most reliable of digital assets, appeared a little more than ten years ago while in the first years of its existence it was of interest only to a small group of crypto geeks. His unexpected entry into the economic arena generated not only an explosion of enthusiasm, but also the problem of the lack of an adequate methodology for it’s analysis as a financial asset. The presence of a number of unique features and the absence of one hundred percent understanding of the laws of the functioning of the cryptocurrency market creates certain difficulties when using the detailed methods of fundamental analysis. The problem is that in addition to these methods, cryptotraders do not have an alternative at the moment.
Does this mean that cryptocurrency entirely depends on the will of the case or on the actions of factors not yet known? Of course no. If unable to use fundamentally new tools, it is necessary to adapt existing ones.
Despite the high volatility of cryptocurrencies, it can be asserted with a certain degree of certainty that some general market laws are quite applicable to digital assets. A textbook example is the law of supply and demand. With the steadily growing trend of almost any asset (cryptocurrencies are no exception) there is a shortage of sellers, which makes it difficult to make large purchases at an attractive price. The opportunity to buy from serious players appears only during a rebound, which indicates the arrival of additional liquidity in the form of sales. The emerging offer allows large players to accumulate long-term positions. Thus, the corrective wave comes to replace the impulse wave; this alternation is described by the Elliott theory.
Moreover, many figures of the price chart, with which currency traders are familiar, can be effectively used when working on the cryptocurrency market. Trust in BTC analysts have developed for the clients a detailed scheme for using this method, taking into account the specifics of the behavior of cryptocurrencies.
Adapting the usual technical analysis to the digital market, it is necessary to take into account a number of factors, the influence of which may be determining. The dynamics of the cryptocurrency rate is very seriously affected by the news background and, in particular, statements by the so-called opinion leaders. If in traditional trading economic factors are still more important, in our case the negative news can seriously collapse the asset rate. In addition, it is important to understand the difference between different cryptocurrencies, as this makes it possible to predict the future evolution of an asset. Do not forget that any cryptocurrency is not just a “thing in itself”, but a blockchain project that can be implemented in various fields, which directly affects its relevance and, accordingly, the course.
Judging by the positive feedback from Trust in BTC clients, most of them find the use of traditional technical analysis for crypto trading quite appropriate and effective.
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