Analyzing crypto price trends is crucial for traders as it alerts them about the right time to enter the market. There are three ways to predict cryptocurrency price trends.
The financial world is increasingly interested in cryptocurrencies, and they can be considered an emerging market. But one thing is certain about cryptocurrencies – new investors are coming in large numbers. The total market capitalization for all crypto assets exceeded $1 trillion. According to CoinMarketCap, there are over 20,000 cryptocurrencies. According to studies, crypto is appealing to a younger crowd, as most cryptocurrency traders are under 40 years old.
But before trading cryptocurrencies, individuals should research and try to predict future trends based on the available information. However, forecasting requires analysis. How can investors forecast cryptocurrency prices? It is a common misconception that cryptocurrency prices are linear. This assumption ignores the many factors that affect a coin's price. There can be sharp price fluctuations in cryptocurrencies.
Perhaps you are wondering which type of analysis is best and how macroeconomic and microeconomic conditions impact cryptocurrency markets. Or maybe you have questions about the value of variables. This article will explain the entire process of analysis from a forecasting perspective to help you filter the online cryptocurrency price predictions offered by agencies and maybe conduct your own cryptocurrency forecasts.
Cryptocurrency price prediction 2023
- Bitcoin crypto price prediction 2023, 2025, 2030
- Ethereum crypto price prediction 2023, 2025, 2030
- Dogecoin crypto price prediction 2023, 2025, 2030
- Bitcoin Cash crypto price prediction 2023, 2025, 2030
- Ripple crypto crypto price prediction 2023, 2025, 2030
- Stellar Lumens crypto price prediction 2023, 2025, 2030
- Tron crypto price prediction 2023, 2025, 2030
- Litecoin crypto price prediction 2023, 2025, 2030
- Cardano crypto price prediction 2023, 2025, 2030
- Polkadot crypto price prediction 2023, 2025, 2030
- Chainlink crypto price prediction 2023, 2025, 2030
- Solana crypto price prediction 2023, 2025, 2030
- Tha Sandbox crypto price prediction 2023, 2025, 2030
- ApeCoin crypto price prediction 2023, 2025, 2030
- Axie Infinity crypto price prediction 2023, 2025, 2030
- MANA crypto price prediction 2023, 2025, 2030
- VeChain crypto price prediction 2023, 2025, 2030
How to predict crypto price trends?
In the attempt to predict the future price movements of the cryptocurrencies, most will use three types of analysis, which have been used in the financial world for a long time. The first financial analysis started in the 18th century when Japanese merchants were trying to predict the price of rice, and it has been perfected ever since.
These are the three main forms of financial analysis:
- Fundamental analysis is the assessment of all aspects of a market, including global and domestic factors, as well as political and economic conditions.
- Technical analysis refers to the study of statistical trends using indicators like historical price movements, patterns, and price charts.
- Sentiment analysis puts the trader’s sentiments and emotions into predicting the crypto price trends. Instead of relying solely on the market data, crypto analysts focus on emotional trends like panic selling or a purchasing spree based on public expectations and perceptions.
Fundamental analysis is particularly useful for people trying to predict whether crypto will rise or fall. It draws inferences from future events and not past price charts. Fundamental analysis can help traders determine the value of cryptocurrency based on a wide range of information. It is mainly used for long-term cryptocurrency price prediction.
The technical analysis depends on the idea that crypto prices follow trends and repeat themselves. Therefore, analysts focus on examining the price movements and trading volumes to forecast the future directions of crypto price, whether it will go up or fall in the future. Technical analysis is used for short-term crypto price prediction.
Cryptocurrency price prediction using fundamental analysis
The “Security Analysis” published in 1934 by Benjamin Graham and David Dodd is widely considered to be the bible for securities valuation. Investors still use the classic book's metrics to evaluate financial assets. To determine the intrinsic value of a stock, you can use either earnings per share (EPS), or the price-to-earnings ratio (PER) when evaluating stocks quantitatively.
However, cryptocurrencies are not like stocks and can’t be analyzed using the same metrics. Since cryptos are widely unregulated assets, they don’t submit to the same regulations as do international companies, and thus they don’t submit any financial reports. This is, in contrast, to publicly traded companies, which often must submit quarterly reports following recognized accounting standards. Traditional business metrics such as liquidity ratios, which measure the solvency of traditional companies, are no longer relevant. The essence of blockchain projects and cryptocurrency, respectively, is that no one company or entity should own or be responsible in any way for the project. All transactions in crypto markets can be publicly "audited" via blockchain. The founding team must also keep the community updated about their plans.
Investors use fundamental analysis to try and determine the intrinsic value of an asset. By using the fundamental analysis and looking at both internal and external factors, it may be possible to determine if an asset is undervalued or overvalued. This can be achieved by analyzing qualitative factors like the state of the economy and cryptocurrency market conditions, as well as the management and market capitalization of crypto companies.
The traditional fundamental analysts look at business metrics such as earnings per share and price-to-book ratio. This information can be used to help them strategically exit or enter positions. However, when performing fundamental analysis for cryptocurrency projects, you are considering as many external factors as possible that may affect the performance of the cryptocurrency’s price. Long-term investors should spend a great deal of time analyzing the project’s fundamentals before investing in cryptocurrency.
Fundamental analysis indicators, metrics, and tools
It’s important to note that cryptocurrencies can’t be analyzed the same way as traditional stock companies but more like commodities. That’s because of the decentralized nature of the assets. Investors still need to have insights into the underlying project from a conceptual perspective, but metrics are different from those used to analyze traditional financial markets. The best way to assess these assets is to first identify the strong metrics – on-chain, project, and financial metrics.
It is important to remember that no single measure can provide a complete picture of the network that we are assessing. For instance, it is possible to look at the active addresses on a blockchain network and observe when there is a sharp increase or decrease. However, this doesn't tell much. For all we know, it could be the same person making blockchain transactions and using different addresses every time. That’s why investors should look deeper and factor in all these metrics, not only blockchain activity.
While these metrics (on-chain, project, and financial metrics) don’t paint the whole picture, they are able to give us some hints for creating indicators.
As the name implies, these are the blockchain metrics. For blockchain networks, the best way to extract all metrics needed is directly from the network, and anyone can do that by creating a new node on the network. However, if you’re only looking to extract on-chain metrics to serve in your future investment decision-making process, then it would make no point to create a blockchain node. This is a time-consuming task and requires quite a few resources, especially for Proof-of-Work (PoW) networks.
Luckily, there are multiple free resources online that may provide on-chain analysis, such as the CoinMarketCap analysis. Here’s an example of what Bitcoin on-chain analysis looks like: https://coinmarketcap.com/currencies/bitcoin/onchain-analysis/.
Some of the most important on-chain metrics to look at are:
- Transaction count: This metric will give you an idea of the on-chain activity. However, the transaction count could also be misleading, as someone could simply move the same funds between two wallets, and each time would be counted as a transaction.
- Transaction value: This value gives you the value of all transactions executed in a set period. Oftentimes, networks brag about their daily transaction volume, but this too can be rigged.
- Active addresses: This metric represents the total address used over a period. Note that both the sender and the receivers' addresses are counted, but some networks offer a unique number of blockchain addresses used in a specific period.
- Fees paid: This number may give a more accurate image of the true demand of the network. The fees represent fees paid to get your transaction through, and the sooner you need a transaction confirmed, the higher the fee will be. In the case of PoW networks, fees tend to increase over time as part of the reward mechanism. Everything is tightly knitted, and the fees paid to validators or miners need to be balanced with the block rewards.
- Hash rate and staking: The hash rate metric should be rising, and it’s only valid for PoW blockchains. A higher hash rate means a more secure network and a growing interest in mining, which may relate to the price of the blockchains’ coin, an increase in transactions, and overall higher profitability. On PoS networks, the hash rate metric is replaced by the number of staked coins.
The qualitative approach to evaluating cryptocurrency's performance is called project metrics. They consider both internal and external factors, such as the purpose and operation of the cryptocurrency project.
These metrics are the easiest to observe, and investors should always look for transparent projects that deliver value to the community. Some of the things you should keep an eye on are the founding team, the project’s whitepaper, and the roadmap.
- The team: Investing in projects led by knowledgeable and skillful team members is always an advantage. Knowing the project’s team and studying their past endeavors can tell investors if they have what it takes to make this project a success. That's why it’s important to document past accomplishments and experiences. This will give insight into the team that you trust to follow the roadmap. To assess credibility, you might also consider early backers and advisors to your project. However, not all projects have declared the team that’s building the project. In this case, you should check the developer community on GitHub and check out the latest developments and updates.
- The whitepaper: All serious projects will have a detailed whitepaper. This is a technical document that explains the technology used, the use cases, the tokenomics and paints an overall picture of the project. The paper should always include the blockchain technology solutions, use cases for the currency, planned features and upgrades, token economics and sale information, and team Information.
- Tokenomics: This chapter is often included in the whitepaper and presents the use cases of the project’s coin. But regardless of what the project's creators say about it, each investor should carefully analyze the provided info and decide if the coin has a real utility. There should also be information about the initial distribution of total supply and other details. It’s important to have funds distributed in such a way so that no part can easily manipulate the market.
- Roadmap: The roadmap for most cryptocurrencies as it shows the timeline for release, testnets, and new features. The roadmap should provide a clear overview of future developments. The road map can be used to determine milestones.
- Competitor comparison: Market competition helps to distinguish winners from losers. A thorough market search identifies the environment in which each project must compete. It is important to understand the ecosystem in order to evaluate the potential of a particular project.
Fundamental analysis is a method of calculating a quantitative value that an investor can use to evaluate the potential of an asset. Analyzing crypto financials means understanding their trading conditions, market response, and surrounding factors.
These are all valuable tools for crypto fundamental analysis. They can be especially useful when assessing the prospect and forming an investment plan.
Information about the coin’s financial history, as well as the economics of the blockchain, is useful information for future investors.
- Market capitalization. The market cap is the cost of all existing coins that are in circulation at a given time. This number is the result you get when multiplying the current price of the asset with the total circulating supply. However, the true issue here is that nobody can tell precisely how many coins are really circulating, as some may be in lost wallets or burnt. However, the market cap has often been used as an indicator of the growth potential of the blockchain.
- Liquidity and volume. On any trading market, liquidity and trade volume are interrelated terms. This is because trade volume can be used to measure a commodity's liquidity. A greater trade volume means that there is more market interest.
- Supply mechanisms. Each blockchain may have a different supply mechanism, meaning that there’s an algorithm that influences the maximum supply, the circulating supply, or the inflation of the market. All these can have short and long-term effects, and investors may react in different ways to them.
The problems with cryptocurrency fundamental analysis
Unlike the stock market, when performing the fundamental analysis for any cryptocurrency market, the metrics may not tell the whole story. That’s simply because the cryptocurrency market is still new and many of the popular projects are still in development.
However, potential future investors should look at indicators to gain deeper insight into the fundamentals of a coin.
Indicators often combine multiple metrics using statistical formulas in order to make it easier to understand them. Although knowing the number of active wallets is a valuable piece of information to have, combining it with more data could be even more insightful, such as the average amount held in a wallet.
These metrics and indicators can be gathered using fundamental analysis tools. You can view the raw data from blockchain explorers but an aggregator, or dashboard, is more efficient. You can even create your own indicators on some of these tools.
You can also use media coverage and user adoption rates to help you predict cryptocurrency movements when conducting fundamental analysis.
Information about cryptocurrency can be useful in providing information about the public perception of a cryptocurrency, as well as any plans or partnerships that could help to boost or decrease cryptocurrency growth. Any news regarding the cryptocurrency project or the wider economy can be used to help reshape fundamentally based estimates.
Other things to consider are scarcity, mainstream adoption, and regulation when predicting the cryptocurrency's price.
Cryptocurrency price prediction using technical analysis
Crypto technical analysis is often used to try and predict future market trends. The technical analysis uses mathematical indicators that are based on historical price action data. This analysis says that markets follow certain patterns and that trends that are established often stay the same for a long time.
It’s important to note that there is no one method that can be used to analyze technical data. Every trader will use different indicators and interpret them differently. Not all technical analyses can be considered 100% accurate.
Technical analysis indicators and tools
The technical indicators used by analysts are calculations of the asset’s historical price. These indicators are shown on the asset’s price chart, and they help traders identify market trends.
Most traders would agree that you would need five to seven indicators to perform technical analysis for any given cryptocurrency. These technical indicators should provide enough information to help you make informed decisions, but not so much that you become paralyzed by analysis.
While the most used combinations of technical indicators for trading can be anything up to seven, it's up to you to decide what is the best combination. It doesn't mean you have to use the same tools for every technical analysis. However it is advisable to limit the number of indicators used at a given time. However, for longer time frames, you might use more indicators, but you should also be informed about the long-term fundamentals.
Using technical indicators will help you identify crypto trends, and the support and resistance levels, mark the historical highs and lows, and plan your market positions.
Technical analysts and day traders use charting tools to generate signals that allow them to buy, sell or indicate market trends. There are two types of basic technical indicators:
- Overlays technical indicators. These indicators use the same scales as prices and are plotted above the stock charts' prices.
- Oscillators. Instead of being placed over a price graph, technical indicators that oscillate between the local minimum and maximum are plotted either above or below a chart.
To generate trade ideas, traders may combine technical indicators with subjective forms of technical analysis, such as chart patterns. Because of their quantitative nature, technical indicators can be integrated into automated trading systems.
Remember that indicators can’t tell the entire story, and a trader should also be aware of the underlying fundamentals.
Chart patterns are the basis of technical analysis and are, without doubt, one of the most valuable tools for price chart analysis.
Chart patterns are a type of shape found within a price chart that can help to predict what prices will do next based on past performance. Chart patterns are essential for technical analysis. They require traders to be able to identify what they are looking at and what they are seeking.
As a crypto trader, you’ll need to understand how to read a candle patterns before using them to build trading strategies.
Because they are clear and understandable, charts help us to understand market sentiment. For instance, if we have a chart of candles with no wick, it suggests strong, decisive bullish/bearish sentiment, with sellers or buyers in control. On the other hand, candles made out only of the wick could mean that prices could move back and forth but end almost unchanged. They could indicate indecisiveness or balance between buyers and sellers.
The two styles most widely followed are Japanese candle and Western-style chart patterns.
The Japanese Candle Chart Patterns are:
- Bullish candlestick patterns – Hammer, Inverse hammer, Bullish engulfing, Piercing line, Morning star, and Three white soldiers.
- Bearish candlestick patterns – Hanging man, Shooting star, Bearish engulfing, Evening star, and Three black crows.
- Continuation candlestick patterns – Doji, Spinning top, Falling three, and Rising three.
Western chart patterns are other patterns that are used to recognize the support and resistance levels of a digital asset:
- Classic Western Reversal Chart Patterns – Head and shoulders, double top, double bottom, rising wedge, falling wedge.
- Classic Western Continuation Patterns – cup and handle pattern, Pennant patterns (or flags), ascending triangle, descending triangle.
- Chart Patterns That Can Be Continuation or Reversal – symmetrical triangle.
Remember that chart patterns are part of technical analysis. They are not a guarantee of a market moving in the predicted direction. Instead, they can be used to indicate what might happen to an asset’s price.
There are five types of technical indicators for trading – Trend Following, Momentum, Volatility, Support/Resistance, and Volume. These indicators will give a lot of insights, from showing the average currency pair's price over time to providing an easier view of support and resistance levels.
As you’ll begin to study technical indicators, you will learn about the most used kinds of indicators:
- Trend indicators: Moving Average (MA), Ichimoku Kinko Hyo, Average Direction Index (ADX), Parabolic SAR.
- Momentum indicators: Stochastic Oscillator, Moving Average Convergence/Divergence (MACD), Relative Strength Index (RSI), Commodity Channel Index (CCI).
- Volatility indicators: Bollinger Bands, Average True Range (ATR), Standard deviation
- Support/Resistance Indicators: Pivot Points, Trendlines and channels, Fibonacci retracement.
- Volume indicators: Rate of Change (Volume), On-Balance Volume (OBV), Force Index, Accumulation Distribution, Chaikin Oscillator, Money Flow Index, Chaikin Money Flow.
- Other indicators: Elliott Waves, Gann, DiNapoli, and similar studies are timing or cycle indicators.
Cryptocurrency price prediction using market sentiment
The market sentiment attempts to predict the future price performance of crypto or other types of financial markets. By studying the sentiment of the market, you may be able to understand the level of excitement or disinterest in a crypto asset. Remember that the attitudes towards the financial market are not always based on quantifiable data but reflect the collective emotions of the masses.
Market sentiment is the way that investors and traders evaluate the emotions and attitudes of others toward a crypto asset. The financial market does not use systematic or technological evaluation to determine sentiment. It reflects the collective psychology of all those involved in cryptocurrency trading. This is revealed by trading metrics and social media. Analyzing the market sentiment in digital currency is essentially a psychological assessment of many factors that have a massive impact on the asset's price movements.
The emotions of investors about certain digital assets can have a tangible impact on market cycles and the value of crypto assets. It will have significant consequences if many investors and traders act on the thoughts, ideas, and feelings they express, regardless of whether they are based on factual information.
One of the most famous situations concerns a highly appreciated online personality, Tesla’s CEO. Elon Musk's tweets had a significant influence on the price of Bitcoin and Dogecoin price, which in turn created a bullish sentiment.
However, the market sentiment is only a part of the picture and should not be considered on its own without performing fundamental and technical analyses.
How to measure the crypto market sentiment
The crypto market sentiment can be affected by the crypto exchanges that crypto investors choose. Let's say an exchange is hit with hacking, crash, or collapse issues. Many crypto investors and traders will lose trust in that situation, which could affect their investment decisions and lead to negative market sentiment.
These are just a few ways to measure market sentiments:
- Bullish percent index (BPI). This index measures the percentage of stocks that exhibit bullish patterns. If the BPI reaches 80% or higher, market sentiment is considered high-spirited. This means that an asset's value is overvalued. A positive percentage of 50% is considered neutral. If the BPI drops below 20%, market sentiment is considered negative and indicates that the marketplace has become overbought.
- The volatility index (VIX). Also known as the fear index, the volatility index is determined by the prices on the financial markets. An increase in VIX indicates a greater demand for insurance on the market, while increased volatility means that traders and investors feel the need to protect themselves from the risks. Moving averages are also used to assess the volatility index.
- The 50-day and the 200-day moving average (MA). If the 50-day MA crosses the 200-day MA, it means that the market has moved in an upward direction. This is commonly called the "golden crossing," which results in high optimism and confidence within the financial markets. When the 50-day MA crosses below the 200-day moving average, it is considered an indication that the asset's value is likely to fall. Investors and traders will be pessimistic.
Cryptocurrency price prediction - Conclusion
Cryptocurrency price prediction is not an exact science, and it will take a lot of practice to begin to master the tools and indicators used by professional traders. It is a great subject for study due to its low entry barrier and availability of data. However, it is possible to attempt to predict some movements in the cryptocurrency market. In order to do so, you will need to be familiar with both the fundamental and technical analysis.
These analyses have been picked up from the world of traditional trading, and traders and investors should be aware of the nature of cryptocurrencies when performing these analyses.
The fundamental analysis of cryptocurrency is like that of traditional financial markets with more traditional assets such as commodities. It is not as important to focus on the historical financial performance, financial statements, or balance sheets of a company. However, the fundamental analysis considers factors such as the utility of the project in the current economy and takes a closer look at the economy created by the cryptocurrency (market cap, total supply, use cases, community, trading volume, news, partnerships, and regulations).
However, it is important to remember that fundamental analysis can only give you an overview of the current cryptocurrency investments. You can get a better understanding of the project and the possible future changes in cryptocurrency prices by looking at all the information. To get a better picture, you can also refer to a whitepaper of a company. You can also examine blockchain metrics which provide crucial information about a cryptocurrency's technology and processes.
Finally, an investor or trader needs to gather the views and opinions of all those involved in crypto or any other financial markets to gain a better understanding of the market's sentiment. Although market sentiment analysis can be helpful, you shouldn't rely just on that. All of the aforementioned factors should be considered when deciding on a new investment.
As always, remember that the cryptocurrency market is highly volatile and poorly regulated. There’s always a risk of hacking when trading on a cryptocurrency exchange. You should never invest more than you are willing to lose.
Free trading tools and resources
Remember, you should have some trading experience and knowledge before you decide to trade based on cryptocurrency forecasts and price predictions. You should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free crypto trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader.
Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how crypto trading works – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.