Cryptocurrency charts are very different from traditional fiat USD/EUR charts. Since crypto coins are traded 24/7, you cannot simply compare them to historically fixed time frames in fiat markets. Understanding market trends is called crypto TA or Technical Analysis.
The volatility in the crypto market is usually much higher than that in traditional markets because of speculation and relatively thin order books. Therefore, it’s also not advisable to look at the price movements of one coin without looking at its surrounding competitors.
For example, suppose Ethereum goes up by 10 percent while bitcoin remains flat. In such a situation, it could be a sign of positive sentiment toward ETH (decreasing demand for BTC), or it could be just a temporary BTC weakness that will correct shortly.
Read on to understand how to analyze the key market trends while you are involved in cryptocurrency trading.
The volume of a cryptocurrency is the total amount of money traded in a specific time frame. Volume is what makes the market go up and down, and it’s one of the most significant indicators to decide whether price movement will be sustainable or not.
If there is no volume behind an upswing, the chances are that it’s just a dead cat bounce before the next significant drop.
A higher than usual volume accompanied by a significant price movement is always better than a low one. However, there are many coins with hundreds of thousands of dollars worth of trading volume throughout the day. It means almost nothing to the crypto market because traders come and go faster than volumes can accumulate, resulting in very shallow order books.
Therefore, higher than average but still relatively low volume is likely just a product of greater interest in that one coin. The chances are that it will soon be followed by lower-than-usual volatility as order book depth increases.
According to the basics of crypto TA, if there is a very high volume, you can assume that more orders are waiting on the buy/sell book ready to be executed at specific price points, which usually leads to more significant swings up or down.
According to reports, rising cryptocurrency trading has introduced new people to the top of this year’s Forbes Youngest Billionaires list.
Similar to traditional markets, charts are available in multiple timeframes, ranging from concise terms (under 1 minute) to long-term (>1 month).
Short-term charts are not suited for any serious analysis due to high volatility and shallow volume most of the time. Therefore, it’s only valid for day-traders trying to catch quick overreactions after significant news releases or extreme price movements caused by whales.
Longer-term charts provide better insight into market sentiment and potential further price movement. Although there is a high volatility on this timeframe, you can see more clearly where support/resistance levels are located and how they behave.
When trading, you should always define your timeframe based on your needs, what kind of trader you are, and how much time you have for crypto trading each day.
Bitcoin is the king of crypto, and its price is usually dominant when it comes to the entire market. If bitcoin goes up/down in a specific timeframe, the chances are that most other coins will follow similar movements.
On a very short-term timeframe, bitcoins BTC can be viewed in isolation from everything else, but its influence becomes evident in the overall trendline on longer-term charts.
When bitcoin falls by 10 percent, altcoins fall even harder since speculators try to get rid of them asap to free their funds from prison. On the other hand, if bitcoin rises quickly due to positive sentiment towards cryptos or anticipation of the significant network upgrade, altcoins tend to rise much more slowly in direct proportion.