Basic Ideas of Crypto Asset Technical Analysis

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Basic Ideas of Crypto Asset Technical Analysis 

To get a better idea of technical analysis, it is very important to understand the fundamental ideas of Dow Theory based on technical analysis:

The market considers everything related to pricing. All existing, previous, and future details are integrated into the asset's current price calculation.

When it comes to Bitcoin or other crypto assets, this will consist of many variables. For example, such as current, past, and future demand, and any regulations affecting the crypto market. The existing price is a response to all the current details, which includes the expectations and knowledge of each coin traded in the market. Technical analysts interpret market sentiment-related prices to make wise predictions and be reckoned with for the foreseeable future.

Price movements are not random. On the contrary, the price often follows the trend, which can be long-term or short-term. Once a trend is formed by a token, it may continue or reverse. Well, technical analysts are trying to help investors in using and profiting from that trend.

'What' is more important than 'why'. Technical analysts focus more on the price of a coin than any variable that results in a price movement. Although various aspects can influence the coin's price to move in a certain direction, technical analysts tend to review supply and demand.

History tends to repeat itself. It is possible to predict the psychology of the market. Traders sometimes react in the same way when experiencing similar sentiments or trends.

Crypto Asset Technical Analysis Indicators: Trend Lines

Trend lines, or the typical direction of a token's intended price, can be very beneficial for crypto asset traders or investors. Nonetheless, using this method is easier said than done. Crypto assets may be very unstable. Observing a chart of the price movement of Bitcoin or other crypto assets will probably reveal a selection of highs and lows that form a linear pattern.

With that in mind, technical analysts can ignore volatility and find an uptrend when looking at a series of highs. Vice versa, you can identify a downtrend when looking at a series of low price positions.

In addition, there is a trend that goes sideways, and in this case, the token does not move significantly in either direction. You should be aware that trends come in many different forms of periods, including medium, long and short-term trend lines.

Resistance and Support Levels

In addition to the trend line, there is also a horizontal line indicating support and resistance levels. By identifying these levels, you can draw conclusions about the supply and demand of tokens.

At the support level, there appears to be a large number of investors or traders willing to buy the coin (large demand). Such investors believe that the currency is priced low at the current rate, and therefore will seek to buy it.

Once the token approaches that level, a buy situation then occurs. Large demand usually stops the decline and sometimes even turns the momentum into an uptrend.

Meanwhile, the resistance level is just the opposite, which is an area where many traders wait patiently to sell tokens. This forms a large supply zone. Whenever the coin approaches that "upper limit", the token will be crowded and the supply back is plentiful.

Moving Average 

This is another technical analysis tool for cryptocurrencies and other instruments in general to simplify trend prediction. The moving average is based on the average price of a token over a period of time. For example, the price movement average on a given day will be calculated according to the token price for every 20 trading days before that day. The data is then connected until it forms a line.

It is also important to recognize exponential moving averages (EMAs). Where the price moving averages give a deeper weight to the price values of the last few days, compared to the previous days. An example is the calculation coefficient of the last five trading days with the 15-day EMA scheme will be twice that of the previous ten days.

Trading Volume

Trading volume plays an important role in identifying trends in technical analysis. A significant trend is accompanied by a high trading volume, while a weak trend is accompanied by a low trading volume.

When the coin drops, you are advised to check the volume that accompanies the drop. The trend of healthy growth in the long term is accompanied by a high increase in volume and a decrease in low volume.

It is also important for you to see that the volume increases over time. If the volume decreases during the rise, the uptrend is likely to end, and also vice versa during a downtrend.

What Are the Determining Factors for the Price of Ethereum? Check it out here!

Ethereum is a cryptocurrency with a market capitalization that is second only to Bitcoin. As a result, now many people have begun to grasp it as an investment.

It's just that, unlike stocks, Ethereum has no formal income, profits, or balance sheet. Because of this, it is difficult to determine the intrinsic value of Ethereum tokens, even though Ethereum actually still has intrinsic value.

Now, many parties may be increasingly curious about how to determine the price of Ethereum. Especially, after its price in the last year skyrocketed higher than its competitor, Bitcoin.

So, what are the determining factors for the price of Ethereum?

How is the value of Ethereum investments determined?

Actually, the answer to the above question is quite simple. Namely, the price is determined from the law of demand and supply.

As previously known, Ethereum investment is now advancing rapidly thanks to the presence of decentralized finance (DeFi) based applications. DeFi technology runs on top of a system called smart contracts, which is operated on top of Ethereum's proprietary network.

Well, these smart contracts are Ethereum's main competitive advantage over Bitcoin. With smart contracts, we can borrow or lend money, insure property, and even trade derivative instruments using Ethereum-based tokens.

This DeFi technology is proven to bring blessings to the price of Ethereum. Throughout 2020, the number of assets stored in the app reached US$ 13 billion, an increase of around 2,000% compared to the previous year. This will certainly directly curb the demand for Ethereum, and cause its price to rise by around 465.15% in the same period.

And vice versa from the supply side. An increase in supply will certainly lower the price of Ethereum.

What Affects the Demand and Supply of Ethereum?

Many factors influence the market supply and demand for Ethereum. Below are the most important factors influencing the supply and demand of Ethereum:

Ethereum 2.0, the prospect of upgrading Ethereum blockchain technology to a better Ethereum network will be a gamble on the rise or fall of the asset's price in the future. The Eth 2.0 network is still in beta, but there are already more than US$1 billion pieces of Ethereum locked in and discourages the supply of Ethereum from the market.

Media coverage, the media plays a huge role in stimulating the demand for cryptocurrencies. While most mainstream media cover Bitcoin, few have yet to broadcast the matter of Ethereum to the masses.

The price of Bitcoin, Bitcoin affects the crypto asset market as a whole. When Bitcoin is bullish, it is likely that other tokens like Ethereum will too.

High transaction volume, high volume increase the amount of transaction fees on the Ethereum blockchain. This fee is paid to Ethereum miners who sell their tokens on the market and increase the supply of Eth.

ERC-20 token, this token increases the usability of Ethereum. Developers can code smart contracts on Ethereum to create DeFi applications that would normally host their own ERC tokens. Ethereum tokens are still required for transactions on the Ethereum blockchain, which will certainly increase the value of Ethereum.

How High Can Ethereum Price Go Up?

Historically, the price of Ethereum has been more volatile than Bitcoin. However, some investors claim that Ethereum's market cap will surpass Bitcoin's. Because, they think Ethereum will be more usable for daily transactions than Bitcoin.

Some analysts predict that Ethereum may reach US$10,500 in the coming years. However, looking at the pace of Bitcoin's price speed between 2017 and 2020, Ethereum could likely be priced at US$3,850 per piece in another three years.

It is difficult indeed to predict where the price of Ethereum investments will go. However, with the development of DeFi, then one thing that is most likely to happen is the rampant demand for this crypto asset in the future. This is why some investors see Ethereum as the "economic bandwidth" of the internet of the future.

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