Technical Analysis and Fundamental Analysis in Crypto

Market analysis in crypto involves understanding the environment and critical determinants in the crypto market.

Before you decide to invest in a digital asset and become a collector of any digital asset, you need to research and feasibility study.

There are two primary critical and different analyses in cryptocurrency that you should consider before you invest in a digital asset.

Technical analysis is a form of market analysis that entails analyzing the past market trend and price movements before investing in a cryptocurrency.

Fundamental analysis examines all the social, economic, and political factors that can affect the value of a digital asset.

It is essential to consider both types of analyses before making investments in crypto.

It is crucial to embark on market analysis to have a concise knowledge and understanding of how blockchain technology operates. They are the technical and fundamental analyses, and both require different procedures and metrics.

It is essential to understand what technical and fundamental analysis entails at this juncture. Let's go.

What is Fundamental Analysis?

---

Fundamental analysis is a robust and encompassing analysis of the tokens on blockchain technology. It examines the real-world utilities, financial stand, and user community of digital assets.

The fundamental analysis lets you decide if a cryptocurrency is underpriced or overpriced.

As an investor in cryptocurrency, you have to carry out the fundamental analysis of the market you intend to dabble into.

The fundamental analysis will enable you to identify all the factors that can affect the value of a digital asset (which you intend to invest in).

This analysis will study the economic, political, and social factors that might affect the digital asset in the nearest and far future.

The fundamental analysis gives detailed answers to questions such as “will the coin be more valuable in the future?” “Is it worth holding for a longer period?”

The answers to these questions will guide you on what digital currency to invest in.

Carrying out fundamental analysis will help identify the metrics affecting the demand and supply of a cryptocurrency. These metrics point to why there is a continuous fall or rise in the value of a digital asset.

Now we consider the second type of analysis.

What is Technical analysis?

---

Technical analysis examines the numbers and statistics that determine digital asset price movement and trading volume on the blockchain.

It is an investment procedure whereby the investor identifies the past market trend and price movement to determine if a digital asset is worth investing in or not.

The past market trend and price movement are essential information that the technical analysis considers.

History is essential; if you don't know how a cryptocurrency fared in the past, it is not advisable to invest in it. That is why technical analysis is essential.

Those who engage in technical analysis are experts who use charts, graphs, and mathematical equations to identify past trends of a digital asset.

The representation of the price rise and fall of a digital asset over the years will support either a buy or sell signal, and it will also show whether the increase is low compared to the fall or vice versa.

Having examined what technical, fundamental analysis entails and how to carry out the two market analyses, it is expedient to identify the differences between the two basic market analyses.


Differences Between Fundamental Analysis and Technical Analysis

---

Technical analysis is best suited for digital assets that have been on the blockchain for a more extended period since it requires identifying past trends and price movement.

You can not have detailed information if you carry out a technical analysis on a cryptocurrency introduced a few years ago.

In contrast, the fundamental analysis is best suited for a relatively new digital asset on the blockchain. This analysis will only examine the company's intrinsic values or the token developer.

The fundamental analysis will give you an insight into the developer of the digital asset whether they have a good track record, reliable and valuable to invest in them.

For instance, an investor should carry out technical analysis on digital assets such as Bitcoin (BTC) and Litecoin (LTC) that were launched in 2009 and 2011, respectively, while fundamental analysis should be done on cryptocurrencies such as EOS and Binance coin (BNB) that were established in 2017 and 2018 respectively.

The fundamental analysis requires fewer technicalities. You do not have to be an expert in the crypto market to conduct an accurate fundamental analysis.

The developers of these digital assets have their basic information and financial data on the internet; you can just go through them and decide whether their cryptocurrencies are worth investing in or not.

Technical analysis, on the other hand, requires experience in blockchain assets. As a technical analyst, you must analyze equations, charts, and graphs.

You require a high level of mathematical expertise before identifying and explaining the market trend, the fall, and the rise of the cryptocurrency value. Also, you should compute equations to predict how the token will fair over a while, using past trends.

Conclusion

---

The cryptocurrency market is precarious. You do not just decide to invest in a coin without identifying the developers' past and present trends.

Most investors prefer to combine technical and fundamental analysis to ensure accurate predictions. However, there are some exceptional scenarios where you can use either of the analysis techniques.

Even though either analysis does not represent a perfect investment guide, they provide reliable information and can be trusted in choosing a digital asset to invest in on the blockchain.



Author: Valentine A. Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.