Cryptocurrency Price Prediction: How Does It Work?

Cryptocurrencies are the latest inventions in the financial sector that have created a huge stir in the global economy, and therefore cryptocurrency price predictions deserve a special mention. Fintech specialists and technology experts take great interest in cryptocurrency price prediction and arrange for blockchain conferences to make people aware of the latest revolution. Various types of cryptocurrencies act like real money, but any central authority does not support cryptocurrencies unlike real money. Instead, cryptocurrencies are backed by an innovative technology called blockchain technology that allows for provably fair transactions on the blockchain network; every transaction on the blockchain network is secured by unique cryptography. The word ‘cryptocurrency’ is derived from the word ‘cryptography’, which is a technology to keep information hidden and safe from attackers. Blockchain is a decentralized technology upon which the entire concept of cryptocurrencies is based.

There are two main types of cryptocurrencies:

Coins including bitcoin and altcoins Tokens

Bitcoin is the first digital currency created using peer-to-peer technology to make instant payments. Each Bitcoin unit is a computer file stored in a ‘digital wallet’ application on a computer or smartphone. People can receive or send Bitcoins to and from their bitcoin wallet which is secured by a private and a public key. Every single bitcoin transaction is recorded on a public ledger, more commonly known as the blockchain network.

Altcoins or the alternative cryptocurrency coins refer to any coins that are not bitcoins. The name itself implies, “alternative to bitcoin.” Some popular altcoins are Namecoin (the first altcoin launched in 2011), Dogecoin, Litecoin, Peercoin, Auroracoin, etc. Most altcoins use similar algorithms to bitcoin, but there are also exceptions. Factom uses PoS algorithms that involve strikers instead of miners. Then there is Ethereum and NEO, both of which use different algorithms from Bitcoin.

Tokens are used more like shares, and unlike cryptocurrencies, tokens are created and distributed through ICO (initial coin offering). Tokens can be represented in one of the following ways:

Value Tokens Security Tokens Utility Tokens

Crypto Tokens Vs. Coins

Crypto tokens differ from crypto coins (or altcoins) in the following ways:

Alternative Cryptocurrency Coins (Altcoins)

Altcoins refer to those coins that are alternatives to bitcoins. Most altcoins are derived from bitcoin’s open source protocol, but altcoins have blockchain and protocols such as Ethereum and NEO.

Signs

Tokens do not have their blockchain network. They live on another blockchain and therefore reap the benefits of their (other blockchain’s) technology. Tokens represent exchangeable and tradable assets that can be a commodity or even a cryptocurrency. Tokens are created by smart contracts that are self-executing and do not need a third-party intermediary to execute the smart contracts. Therefore, the main difference between crypto-coins (or altcoins) and tokens lies in their structure. Alternative cryptocurrency coins are different cryptocurrencies that have their own blockchain networks, while tokens are created on top of another blockchain network that facilitates the creation of dApps.

Crypto-coins or altcoins can be used as a ‘value transfer’, while tokens do not themselves facilitate transfer. Coins are native currencies of their blockchain network, while tokens reside on already existing blockchain networks.

Crypto-coins can only be exchanged through cryptocurrency exchanges because they are built on non-standardized code protocols. On the contrary, tokens (eg ERC-20) can be exchanged by internal applications with minimal friction because they are built on standardized code protocols.

How to predict crypto price trends?

Analyzing crypto price trends is crucial for traders as it alerts them to the right time to enter the market. It also helps traders to decide whether to buy, sell or hold the cryptos to reap the maximum benefits. There are three ways to predict crypto price trends:

Technical analysis

Technical analysis involves the use of statistical trends based on historical price action. The technical analysis depends on the idea that crypto prices follow trends and repeat themselves. Therefore, analysts focus on examining the price movements and trading volumes to predict the future directions of crypto price, whether it will rise or fall in the future.

Fundamental analysis

Instead of depending on the historical price trends, fundamental analysis takes a different approach. It analyzes the factors that contribute to the changing price trends. It focuses on the fact that the value of a cryptocurrency can be either undervalued or overvalued, and then it is time to make corrections.

Sentimental analysis

As the name suggests, the sentimental analysis puts the trader’s sentiments and emotions into predicting the crypto price trends. Instead of relying only on the market data, crypto analysts focus on emotional trends such as panic selling or a buying spree based on public expectations and perceptions.

Understand maps

Charts play an important role in analyzing crypto price trends. A candlestick is a type of price chart used when performing technical analysis that displays high/low, open/close prices of a derivative, security or a currency.

Elements of Candlesticks

There are three main elements of a candlestick chart:

Natural Body: The difference between the opening and closing prices is shown by the colored section on the candlestick chart.

Upper shadow: The vertical line between the high of the day and the closing price (in the case of bullish pattern) or opening price (in the bearish pattern).

Lower shadow: The vertical line between the lowest price of the day and the opening price (in the case of bullish trend) or closing price (in the bearish trend).

Types of candlesticks

Candlestick chart patterns can be divided into two main categories – bullish patterns and bearish patterns, which are further subdivided into the following categories:

Bullish Patterns-

Among the bullish patterns come the following types:

Hammer

This pattern indicates that an intense buying spree is causing a surge in prices despite selling pressure.

Inverted hammer

This pattern indicates buying pressure followed by selling pressure and that the buyers will soon have control over the crypto prices.

morning star

This indicates a reduction in the selling price and the start of the bearish market.

clumsy patterns-

Among the bearish patterns come the following types:

Hanging Man

This indicates that selling pressure is greater than buying pressure.

shooting star

This indicates that the selling pressure is taking over the market.

Most popular techniques used for technical analysis for cryptocurrencies

Some of the most popular methods used for both short-term cryptocurrency forecasting and long-term cryptocurrency forecasting are listed below:

Trend lines

This is the most simple technical indicator for cryptocurrency price prediction. It consists of a straight line connecting two or more price points that extend into the future to represent support or resistance.

Average Directional Index

It is a technical indicator used by traders to determine the overall strength of a trend.

Bollinger bands

This tool is used for long-term cryptocurrency predictions. It takes into account the price range of an asset within which it typically operates.

Relative Strength Index (RSI)

RSI is a technical analysis tool or a momentum indicator that measures the strength of price trends of an asset or other market variables to determine whether it is overbought or oversold.

Standard Deviation

It is a technical indicator to measure the amount of variation or spread that the crypto price trend has gone through over a period of time.

Moving Averages/RSI/MACD

Moving average highlights the direction of a price trend. It is a graphical representation to predict crypto price trends by considering the mid-price movement of an asset over a specified period of time.

Fibonacci ratios

The Fibonacci retracement ratios are used to make an accurate cryptocurrency price prediction to the degree to which an asset may move from its current price.

Volume Weighted Average Price (VWAP)

As the name suggests, the value is traded until its total volume is traded over a specified period of time, mainly a day.

Time Weighted Average Price (TWAP)

It is a well-known trading algorithm to make cryptocurrency market predictions based on weighted average price, calculated over a specified time.

Resistance and support levels

The potential resistance and support levels can be identified using the Fibonacci retracement indicator, which helps traders identify a likely trend change.

Are there any indicators that make analyzing market movements easier?

Trading indicators are the tools used to interpret the behavior of a market, how the price moves in response to specific market behavior. Trading indicators are created using mathematical interpretations of the specific cryptocurrency’s historical price data and trading volume to predict the market trend. There are various technical indicators like Bollinger bands, fib retracement, moving averages, etc., which are used for the best cryptocurrency forecast. They perform three folded functions of prediction, confirmation and creating alerts for investors and traders when they enter the market and make the necessary moves.

However, technical analysis alone cannot gauge the fundamental factors that contribute to the change in the price of a particular cryptocurrency. No two analysts can give the exact crypto predictions. This is because every technical indicator picks trends based on their research. Hacking attacks, significant news stories, regulations, landmark agreements, new product launches, etc., change how a technical indicator makes price predictions. Therefore, relying only on one form of technical analysis will not provide a reliable price forecast.

At CryptonewsZ, we make the most reliable cryptocurrency forecast. We use these trading tools and the popular technical charting tool, tradingview, to make appropriate price predictions for cryptocurrency trends. In addition, we also do a complete analysis of price predictions for various cryptocurrencies. So we are one of the best cryptocurrency prediction sites to count on.

Closure

The crypto market consists of several variables that cannot be fitted into one single chart. Therefore, there are many indicators in the market; the cryptocurrency price prediction platform selects them according to their preferences and comprehensibility. On CryptonewsZ, the best site for cryptocurrency prediction, try to accurately learn all the technical indicators to speculate the crypto prices. However, a trader does not use all the indicators for cryptocurrency predictions because most of them duplicate each other. Using all of them will repeat the same part of the market. Also, no indicators can predict the future with much accuracy; they only help traders observe trends for assessing the direction and strength of the variables. Therefore, choosing the indicators wisely to make the correct cryptocurrency price prediction reflects the accurate picture of the market conditions.

Here we provide cryptocurrency predictions of Bitcoin and altcoins along with their technical analysis, price charts, market sentiment and much more.