Types of Cryptocurrency Analysis

Types of Cryptocurrency Analysis

It is no news that crypto trading is one of the hardest and risky forms of trading; it involves a lot of risks such that most, if not all exchanges, always issue warnings at signups or trade executions. Nonchalance is one attitude that cannot be tolerated in crypto trading; thus, a trading strategy must be employed.

A successful cryptocurrency trading strategy involves carefully analyzing and planning for an opportunity. The right strategy can make or break a cryptocurrency transaction. It can help you secure a better return and minimize risk.

As a trader, care must be given to how trades are being ordered so as not to run at a loss. This is done through different types of analysis before embarking on a trade. We could talk about which trading strategy works best for you all day, but without knowing how to read the market, you will never know what you should do.

Being able to read the market is very important in deciding which strategy to use. In this course, we will break down the two main forms of analysis: fundamental and technical. There is a third unpopular one called Sentimental Analysis, and it is going to be briefly described here.

A Comprehensive Description of The Types of Cryptocurrency Analysis

Technical Analysis: Technical analysis is a process utilized by financial analysts to evaluate historical data. Instead of looking at a coin's intrinsic value, they look at its historical performance. Analysts try to find patterns of repeated behaviors in historical data to analyze the market's sentiment. Technical analysis is not random, it assumes that price movements will always hold in the future.

Technical analysis is a process utilized by people who are interested in coins. They follow a trend when it forms and oppose it once it gets too popular. This process will eventually lead to a reduction in supply, which will cause the price to go up. This process leads to a reduction in supply due to high demand.

With cryptocurrency technical analysis, you’re studying statistical trends and looking at historical volume and activity – including price movements and swings to make educated predictions on where the price is going over the short-term and long-term.  

Moreso, while it is not exactly clear which trading tool will fit into your trading toolbox, some key Fibonacci retracement indicators will help you make better decisions. Fibonacci retracement trading is a type of technical indicator that traders use to determine price action. It shows the distance between a given contract and the previous price.

Although this method can work well for crypto, it can also be very volatile. Due to this, it can be very challenging to follow through with all of the calculations.

Fundamental Analysis: Instead of looking at the current price, fundamental analysis focuses on the underlying financials of crypto. This analysis helps determine if the current price is too high or not. Unlike technical analysis, fundamental analysis is focused on analyzing a coin's intrinsic value.

This process involves gathering all of the necessary details to properly value a coin. That is, instead of analyzing past performance, fundamental analysts focus on an asset's intrinsic value.

Imagine that an innovative coin or project has real-world applications. If you believe its price is too cheap compared to its intrinsic value, then you should invest in it. However, if an asset is overvalued, then you could trade it to make a profit. This type of investing is called shorting.

Although fundamental analysis is not exclusive to cryptocurrencies, it is also important to consider their value in terms of their community and potential applications. Let’s look at why people are using bitcoin as a medium of exchange. Its unique characteristics could make it different from other forms of payment. Its intrinsic value could also increase as more people adopt it. Another important factor that affects intrinsic value is the impact of events like the BTC halving.

Although most events can happen on their own, they can also affect the price significantly. For instance, an unexpected government decision could affect the price of Bitcoin.  Fundamental analysis is a process used to evaluate the intrinsic value of a coin. It can be very useful if you see a value that isn't proportional to its price.

Sentimental Analysis: The third approach is sentimental analysis. This is where you can use sentimental analysis to invest in stocks. It can also play a role in cryptocurrency exchanges. This process is focused on analyzing the sentiment of various individuals and groups. It can detect signs of major confidence or lack of trust in the market. With sentimental analysis, you can look beyond the numbers to see what people are thinking and feeling.

Fundamental Analysis vs Technical Analysis

Technical analysis is typically used for short-term trades. However, it can still be used for long-term trends.  Technical analysis is a very useful method, but it can also be a mistake to rely on it too heavily. Doing so alone could lead to a missed opportunity.

Most traders use a balance between historical data and the intrinsic value of each asset. The key is to learn how to use each method. Doing so will help minimize trading risks and maximize returns.


Public opinion is of the fact that Fundamental analysis is the best type of cryptocurrency analysis. However, it still boils down to the trader to decide what type of analysis is best suited for a particular type of token and the tokenomics around such token.