Crypto Trader’s Guide
Strategy reigns supreme in the world of Bitcoin trading. It cannot also be helped that there will always be a debate over which method of analysis is the best. Your chances of making a profit may be increased if you use the appropriate trading method analysis.

However, if you choose the wrong approach, things are not likely to go well.

When addressing the markets, fundamental and technical analyses are two significant options, but they are on different sides of the spectrum. In this article, we will look at the overview of the two analyses and discuss the advantages and disadvantages.


What is Fundamental Analysis?

Fundamental analysis in traditional finance comprises macroeconomic (overall economy and industry) and microeconomic (business figures, financial indicators, and views) elements. Fundamental analysis in the crypto industry tries to identify a crypto asset's inherent worth by considering both quantitative and qualitative variables. It helps determine if the crypto-asset is now cheap or overpriced and decide based on that information. One may invest in the coin if they believe its price is low concerning its inherent worth and, in principle, profit. In addition, this analysis is helpful in assessing a crypto asset's long-term attractiveness.


Using this method of analysis has several benefits and drawbacks, which include the following:

Benefits

It limits the room for personal biases. It aids traders and investors in gathering the necessary data to make informed judgments about which position to take.

Long-term investors should consider it. Future predictions, rather than price charts, are used by fundamental analysts to make judgments. As a result, fundamental analysis is better suited to anyone wanting to make a long-term investment choice or report on the cryptocurrency market.

It is considerably less intimidating than technical analysis since it does not need specialised abilities such as reading and understanding charts and trend lines.

Drawbacks

Short-term price changes are challenging to forecast. Fundamental analysis cannot predict the short-term price movements most crypto traders engage in since it does not focus on price movement utilising charts.

It can take a long time since it requires numerous areas of investigation, making the procedure highly difficult.


Price-performance does not always correspond to fundamental analytical requirements. When analysing a project, fundamentals give a comprehensive view, but they do not always convert to pricing performance. The size of a token's community, for example, may or may not affect its price.

What is Technical Analysis?

Instead of looking at the precise goal of a coin or project, analysts that adopt this approach look at historical market data (trade volume, previous coin pricing trends, etc.). Technical analysis is more concerned with price statistics and charts than the causes for them. It is a necessary component of intraday and another short-term trading. Because statistics are the foundation of technical analysis, there aren’t many differences between crypto and traditional finance.

Compared to fundamental analysis, technical analysis requires a level of competence. Longer trends yield more consistent results than shorter trends.

Order book, trading volume, candlestick charts and figures, SMA (moving averages), and MACD charts are some tools and indicators used in this method.

Benefits

Trading tools allow you to interact with the market at any time and create your strategies based on it, using a variety of indicators and/or statistics.

It aids in the discovery of new trends. The Technical analysis identifies new trends and trend reversals, making it easier to timing trade entry and exits.

There are already established rules for interpreting various technological signals. Technical signals are produced based on historical price data, which means investors have a guideline of what to expect when a signal is triggered, whereas fundamental research is up to an investor's opinion.

Drawbacks

It ignores fundamental market-moving forces. Indicators are a result of price formation rather than a cause. Still, they do allow you to anticipate short-term changes with a high degree of certainty, identify the times when trends change and track how oversaturated the market is at any one time.

It demands a high level of expertise. Although gathering data for technical analysis is very simple, reading charts and patterns takes skill.

It is prone to mistakes because of cryptocurrencies’ high volatility. Any indicator used in the technical analysis must be able to reliably anticipate future trends to function properly. The high volatility of most digital currencies is well-known, which can impact the findings of any indicator used.

Which analysis should you use?

Most traders combine the two approaches, examining historical statistical data and the inherent worth of each asset. The worst error you can make with technical analysis is to put too much faith in the approach. It might be a mistake to rely on it alone; you will need further information and context. Fundamental analysis is in the same boat. It will frequently represent what an item should be valued rather than the current market price.

To simply put, it depends on how you use each method. You will also need to put extra effort into research about your preferred crypto-asset(s) to minimise trading risks. Again, it is worth noting that cryptocurrency markets are volatile. Whichever method you will be using, it is also best partnered with a secure and user-friendly trading platform like Bitcoin Era. All real-time data, from price changes to chart updates, are available here to make it easier to perform your analysis!