Applying Fundamental and Technical Analysis - Part 3 of Best Crypto Trading Practices

Applying Fundamental and Technical Analysis

Since Quantify Crypto is a platform performing technical analysis, a frequent question I am asked is “Why do you prefer Technical Analysis over Fundamental?”.   My answer is always the same, I prefer to do both: Fundamental and Technical Analysis.   As an investor and trader, I want to use all the resources I have at my disposal to make the best investments and trades.   I feel it is a significant error to just key in on a small subset of metrics to make your trading decisions.

Fundamental reasons for investing in Bitcoin, Altcoins and the Blockchain

Fundamental analysis should be the starting point for every asset you invest in.   If you feel a product is not fundamentally sound, you should not invest in it.   For cryptocurrency, every investor should have a basic knowledge of how the blockchain functions and the concept of a trustless transaction without a required intermediary.    

Bitcoin is an anti-inflationary asset as it has a fixed supply.  Fiat currencies, like the US dollar for example, are having its greatest printing press moment due to central bank stimulus programs to combat Covid19 economic hardships.   This combination of an anti-inflationary asset and global stimulus policy supports a historical bullish scenario for Bitcoin and cryptocurrencies.

Fundamental Analysis Quantify Crypto provides

Our research has shown cryptocurrencies that trade on quality exchanges, trade on multiple exchanges and trade against Bitcoin outperform cryptocurrencies that do not meet these 3 metrics.  It’s not certain why this is, but I provide my thoughts on each of these three points:

• Trade on a quality exchange – Quality exchanges have the most difficult listing requirements. Specifically, they want proof that a cryptocurrency has quality.  This usually means a proven team, a product with a use case and a user base.  In short, we are relying on a crypto exchange’s vetting evaluation to confirm the viability of a crypto project.
• Trade on multiple exchanges - This is really an expansion of item #1 above. Trading on multiple exchanges often means trading in multiple regions throughout the world.   This indicates multiple independent reviews from different countries (some with unique and a variety of jurisdiction requirements) has been performed.    Additionally multiple exchanges equate to expanded global liquidity for the trading of that crypto.  An exception to this rule is the native token for a specific exchange.  Such tokens have a significant use case and generally will not be found on a competitor’s trading platform.
• Pair trading with Bitcoin – Cryptocurrencies on an exchange trade against stablecoins and often the native tokens of that exchange. Trading against Bitcoin seems to be reserved only for the “top” cryptocurrencies listed on that exchange.    Bitcoin liquidity requirements is the reason only the top altcoins trade against Bitcoin.    Decentralized Cryptocurrency trading is an exception to this rule, as wrapped Ethereum is the dominate base crypto asset for DeFi trading.

Applying Technical Analysis

After you have a researched set of cryptocurrencies you want to invest in, now is the correct time to apply a valid buying method (not covered in this article) and technical analysis for a good entry point.   It is important to have patience and wait for a true technical entry point.    Technical entry points for Trend, RSI, MACD, Baseline are all available on the QuantifyCrypto.com website for multiple time periods.   It is often best to have multiple technical indicators showing a bullish indicator for multiple time periods.  Additional articles about applying technical analysis is available on the QuantifyCrypto.com platform.

Why is technical analysis more important for crypto than for stocks?

The stock market has greater regulatory requirements with higher visibility than the cryptocurrency market. Publicly traded stock companies are required to produce quarterly financial reports, are audited yearly, have a CEO to identify the corporate plan, etc. With fewer news and reporting requirements for cryptocurrency, the analysis of price patterns (technical analysis) becomes critically important.

Quantify Crypto provides real time technical analysis to support your trading decisions. We have the fastest live price feed of all cryptocurrency informational platform. Our proprietary trend algorithm calculates the predicted direction of future price moves. It is specifically tailored for the cryptocurrency market. Our state-of-the-art displays are designed to provide maximum amount of significant data on a single screen.

None of this is meant to be financial advice and I do not have any financial expertise. Although I worked at the New York Stock Exchange for over 23 years, it was as a developer supporting computer systems, not as a stock trader.

Full discloser: I do own Bitcoin and other Altcoins.