At the moment, the cryptocurrency market is very volatile. And to make a forecast for at least a few months in advance, you need to pay attention to several types of trends. Most traders would divide them into three:
— Technical analysis
— Fundamental analysis
— Emotional analysis I. Technical analysis.
A trader studies price movements, such as trading volume and other important indicators, and based on historical activity, detects statistical trends. Such analysts usually believe that prices follow trends and history repeats itself. They use their data to predict whether a price will go up soon or not. However, it should be noted that such a forecast cannot guarantee accuracy. II. Fundamental analysis.
This is a different approach. Instead of looking at where prices are going, a trader looks at factors that influence the numbers, such as the economy or the way a company is managed, to determine the value of an asset. Such analysts exclude emotions from the process and follow the belief the market could underestimate or overestimate the value of a cryptocurrency, which would eventually lead to a rate correction. III. Emotional analysis
or analysis of investors' emotions. With this approach, traders effectively track key market players: journalists, influencers, and consumers. The essence of the method lies in the fact that technical data does not always reflect the full picture, and trends such as panic selling or a surge in purchases can be identified in advance based on public perception and expectations.
For example, since March 2020, the TOTAL index, which takes into account all cryptocurrencies, has grown by almost 1000%. We all remember what happened in March
, so we will not discuss this in more detail. From April to December, the index grew at a consistently moderate pace, being in the middle zone. But then an "explosion" followed, and growth accelerated. The index moved to the upper zone, and then completely "went off the scale" above the upper line, entering the overbought state.
The fact that the market is overheated is also evidenced by the Google Trends chart: