The cryptocurrency market is extremely volatile, rate jumps can be more than 10% per day. For example, last week Bitcoin for the first time since January of this year dropped to $ 28.8 thousand.
After that, the quotes of the main cryptocurrency returned to the range of $ 32-36 thousand.As of June 30, BTC is traded in the region of $ 35 thousand, and its capitalization is $ 657 billion.
High volatility opens up great earning opportunities for inverters. The experts explained how beginners can learn to see cryptocurrency market signals and use them to find entry points.
Key points in the analysis of the cryptocurrency market
The beginning of time
Successful investments are hard daily work, studying market trends, monitoring specialized forums and social networks, analyzing technical analysis and correctly compiling a portfolio, explained Nikita Soshnikov, director of Alfacash. According to him, the complexity of investment activity is that it is associated with risks and a huge psychological burden, which is difficult for beginners to withstand.
“This is the hardest thing for newcomers: not to panic, but also not to remain in an asset that is doomed ,” the expert noted.
Also, successful investments do not imply that the investor does not make the wrong strategic steps at all, even professionals make mistakes, so the main thing is the total ROI (return on investment, return on investment), distributed across all assets in the investment portfolio, Soshnikov added.
First steps to make money – analysis
Any financial market, including the cryptocurrency market, does not tolerate a superficial approach and will punish you with a loss, says TradingView analyst Maxim Lushnikov. According to him, in order for a beginner to consciously find an entry point to an asset, one needs to have a basic understanding of the economy, the rules for price formation in the market and know the basics of technical analysis.
Exchange trading has a century and a half of history, while the crypto market is barely 10 years old, said Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. A crypto investor can find many answers in traditional markets. The analyst advised to study the elementary fundamentals of technical analysis: moving averages, key support and resistance levels.
“To begin with, this will be enough to understand some of the mechanics of the market. Then you can delve into something more serious, for example, cluster analysis. But this will take more than one year of study, ”said Karkhalev.
It is worth studying the basic concepts of diversifying the investment portfolio and understanding which cryptocurrencies exist in principle and whether they can be categorized somehow, advises the director of Alfacash. According to him, separate asset classes include digital coins used as means of payment, blockchain platforms for DeFi and smart contracts, as well as tokens of crypto-exchanges and decentralized trading platforms.
You should not completely ignore technical analysis, but in general, if we are not talking about numerous transactions during the day, then you can do without it, Soshnikov noted. He argues that an investor should take the time to study the technology itself in order to understand what he is investing in.
“If an investor does not understand what he is investing in, how it works, then investing is not worth it. Better to buy something understandable, ”added the expert.
What you need to know before entering the crypto market?
Fundamental factors that a crypto investor should understand before buying digital coins:
- There is no endless growth;
- You are guaranteed high profitability for a month, and in exchange they simply ask you to send a referral link and «bring a friend»? This is most likely a hoax;
- Have you read the description of the project, but did not understand anything, because there are too many technical terms that you do not understand? Don’t invest. You will not be able to reasonably assess the prospects of an incomprehensible project;
- Be sure to check your country’s tax laws regarding digital assets. Think about it now before buying;
- You have compiled an investment portfolio, but a couple of projects, contrary to your forecast, are steadily falling in price. “Probably, cryptocurrencies are not mine,” the thought comes to mind. Throw it away, even multibillion-dollar fund managers do not have a fully growing investment portfolio.
How to determine the potential of a token?
If you invest in Bitcoin or Ethereum, two of the most popular and stable coins, then it makes no sense to conduct in-depth analysis, since these coins are a priori promising, says the financial analyst of the Currency.com crypto exchange. According to him, when buying any other token, you need to apply the approach of a venture investor and understand that you are investing not in a digital coin, but in a startup and its team, Karkhalev explained.
In this case, you need to evaluate the idea of the project, the reality of the implementation of its idea, the economics of the project, what it will earn, the use of the token, the team and its background, to understand whether someone has invested in this project from large funds and, of course, on what he is at the stage now, the analyst added. He recalled that, according to statistics, 95% of startups cease to exist in the first year.
Crypto Investor Tools
All the latest news and reference materials on cryptocurrencies and trading can be found on the website Mining-Cryptocurrency.ru.
You also need to study the training materials of the Binance Academy, advised Nikita Soshnikov, director of Alfacash. In his opinion, this is an excellent reference for those who are just starting to dive into the world of cryptocurrencies. Soshnikov also recommended researching the community by reading comments on Reddit. Another expert tip is to follow the movements of large volumes of digital coins using the Whale Alert service on Twitter.
For more advanced market participants, the financial analyst at the Currency.com crypto exchange advised using the services Glassnode, CryptoQuant or Skew. According to Karkhalev, it is important to analyze how these metrics behave during periods of market downturn and rally in order to identify patterns.
Features of cryptocurrency trading
As we already wrote, cryptocurrencies are highly volatile and have technological properties that are not inherent in conventional assets. The experts explained what the peculiarity of digital coins is and what prospects this opens up for investment in crypto assets.
What caused the high volatility?
A young market is always more volatile than a mature and time-tested one, explained Vladimir Smetanin, director of the financial company Newcent. According to him, regulators prohibit large players (such as government funds and conservative investors) from trading cryptocurrencies, so the market is not yet liquid enough.
The exchange rate of many fiat currencies depends on the quotes of natural resources mined in the country, since they constitute a significant part of exports, and virtual coins are not tied to tangible values, so their value is quite difficult to understand for an ordinary layman, the expert noted.
According to Smetanin, high volatility can be attributed to both negative and positive properties, since this factor is used by traders to obtain high returns.
Outside the exchanges
In addition to trading on centralized crypto exchanges, investors can conduct transactions on the OTC (over the counter) market. Its main difference is that OTC trades are carried out directly between buyer and seller.
An OTC transaction is more beneficial for large transactions, in terms of security and privacy, since the user does not have to register on the exchange and go through the verification procedure, disclosing his data.
The most important advantage of OTC for traders is the ability not to influence large transactions on the market, hide their intentions and make transactions at the best price, said lead analyst at 8848 Invest Viktor Pershikov.
“OTC trading is the most suitable format for large and institutional participants in the cryptocurrency market ,” he added.
Pump communities
Due to low liquidity and high volatility, as well as a lack of regulation, some groups of investors can influence the quotes of digital coins and use it to their advantage. According to Anton Kravchenko, CEO of Xena Financial Systems, such practices are found in any market, but cryptocurrency is easier to manipulate than traditional assets.
“The higher the liquidity, the more difficult it is to influence prices. The total capitalization of the entire cryptocurrency market is lower than the capitalization of one Apple company, so there are a lot of manipulative price movements on the crypto market, ”the expert added.
Storing coins
In the traditional market, special depositories are provided for the storage of securities. These are financial institutions that settle transactions and keep records of investors’ rights to securities. Depositories are controlled by financial regulators.
Digital assets are stored on the blockchain: a distributed, decentralized ledger that is the backbone of the cryptocurrency ecosystem. A special wallet, which can be of three types: software, exchange or hardware, allows you to access the blockchain and carry out transactions with digital coins.
Each cryptocurrency wallet, regardless of the operating environment, contains private and public keys.
- The public key is a digital string that anyone can see. It consists of a set of letters and symbols and is used when sending funds to a wallet.
- A private key is a kind of security key made up of a series of cryptographically generated random numbers that cannot be cracked. Essentially, it is a 256-bit or 32-byte hexadecimal number that is created to sign translations.
IPO analogs
When companies issue their own securities to attract investors, an IPO (initial public offering) is carried out.
Similar procedures exist in the world of cryptocurrencies : ICO (initial placement of tokens), IEO (initial exchange token placement), IDO (IDO – primary decentralized placement of tokens). The closest thing to an IPO is to an IEO. In this case, the crypto exchange is engaged in the placement of new tokens and their sale to investors. Projects can independently sell their tokens on their own platforms (ICO).
The idea behind IDO is that the tokens issued by projects are already provided with pools of investor liquidity on decentralized exchanges. Often, the IDO token grants its holders the right to vote and control the direction of the underlying protocol.
Non-refundable
The decentralization technology on which the blockchain is built has another feature. The investor may lose funds when they are sent to another address, if he made a mistake while writing it.
When digital coins are sent to a non-existent address, tokens are burned. Even if the cryptocurrency is sent to a stranger, it is impossible to return it, since there are no managing organizations and third parties in the blockchain that can cancel the transaction.
