Digital currencies are the latest discovery in the financial industry that have been formulating a commotion in the global economy, and hence, cryptocurrency price prediction deserves to get a special mention.
Technology experts and fintech specialists are taking special attention in the best cryptocurrency price prediction this year and making way for blockchain conferences to educate people of the latest revolution in technology. Different types of cryptocurrency act like the fiat currencies, but any central authority except El Salvador as of now has not backed digital currencies like real money.
Instead, digital currencies are backed up by the blockchain technology that offers for verifiably fair transactions on this network. Each transaction on the blockchain network is safeguarded by cryptography. So, now it is clear that the term “cryptocurrency” is derived from “cryptography” which can be defined as a technology to keep information safe and hidden from attackers.
There are 2 primary types of cryptocurrencies:
- Coins that include Bitcoin and altcoins
To start with Bitcoin, it is the first cryptocurrency that was made by using P2P (peer-to-peer) technology to enable instant payments. Each unit of BTC is a computer file that is stored in a crypto wallet app on the smartphone or computer. People can send or receive Bitcoins from and to their BTC wallets that have been secured by a public as well as a private key. Each and every Bitcoin transaction is recorded on the public ledger that is more commonly termed as the blockchain network.
Altcoins on the other hand, implies alternative cryptos other than Bitcoin. Some of the popular altcoins are Ethereum (ETH), Ripple (XRP), Dogecoin (DOGE), Cardano (ADA), etc. They operate the same way as Bitcoin, but there are exceptions as well. Bitcoin uses the Proof of Stake algorithm, while Ethereum uses Proof of Work algorithm.
Token, to start with, they do not have their own blockchain network. They operate on another blockchain and accordingly reap the advantages of their technology. Tokens portray fungible and tradable resources that can be a product or even a digital currency. Tokens are formed via smart contracts that are self-executing and do not require any third-party to enact the smart contracts. Hence, the main disparity between tokens and crypto coins (or altcoins) lies in their formation. Alternative digital currency coins are varied digital currencies having their blockchain networks, whereas tokens are formed on top of other blockchain networks that operate the creation of dApps.
Cryptocurrency Price Prediction: How To Predict The Price Of Crypto?
Analyzing the trends of crypto price is important for the traders as it alerts them regarding the correct time to enter the market. It also enables the traders to decide whether to purchase or sell, or even hold cryptos to obtain the maximum results. There are three ways to predict the price trends of digital currencies:
Technical analysis includes the use of statistical trends that are based on historical price actions. It depends on the idea that the prices of crypto abide by the trends and repeat themselves. Therefore, analysts aim on examining the movements and trading volumes of the price to forecast the future movements of crypto price, whether it will increase or decrease in the future.
Instead of giving complete dependence to the historical price trends, fundamental analysis catches a different approach. It studies the factors that contribute to the shifting price trends. It aims on the fact that the price of a digital currency can be both overvalued or undervalued, and then it is time to do the required corrections.
As the name suggests, the sentimental analysis keeps the sentiments and emotions of the trader into predicting the crypto price trends. Instead of depending solely on the market information, crypto analysts emphasize on emotional trends like a purchasing spree or panic selling based on public perceptions and expectations.
Evaluating Charts For Cryptocurrency Price Prediction
Charts have an important role in the analysis of the crypto price trends. A candlestick is among the types of price chart that is availed while performing technical analysis that shows high or low, closing or opening prices of a security, derivative, or a currency.
Elements of candlestick
The are three primary elements of candlesticks:
- Natural body: The difference in opening and closing body is forecasted by the highlighted portion on the candlestick chart.
- Upper Shadow: The vertical line among the high value of a particular day and the closing value or opening value.
- Lower Shadow: The vertical line among the lowest value of a particular day and the closing value or opening value.
Types of Candlestick
The chart pattern of candlestick can be divided into two prime categories: the bullish and the bearish patterns, which are further subdivided into the categories mentioned below:
Under bullish pattern there are the following types:
- Hammer: This pattern denotes that an intense purchasing spree initiates a surge in the prices in place of having selling pressures.
- Inverse Hammer: This pattern denotes purchasing pressures that is followed by selling pressures and that the purchasers soon will have authority over the crypto prices.
- Morning Star: This portrays a decrease in the selling price and the start of the bearish market.
Under bearish pattern there are the following types:
- Hanging man: This portrays that the selling pressures are more significant than purchasing pressures.
- Shooting Star: This portrays that the selling pressures are taking a toll over the market.
Techniques That Are Used For Technical Analysis Of Crypto
Some of the most famous methods that are used for both short term and long term cryptocurrency price prediction are mentioned below:
- Rend Lines: This is the most direct technical pointer for digital currency price prediction. It comprises a straight line that connects two or more points of price that expand into the future to represent resistance or support.
- Average Directional Index: This is an important technical indicator that is used by traders to evaluate the overall strength of a trend.
- Bollinger Bands: This technical tool is used for long-term digital currency predictions. It considers the price range of an asset among which it typically functions.
- Standard Deviation: This is an indicator to calculate the amount of dispersion the crypto price trend has travelled through over some time.
- Resistance and Support Levels: The potential support and resistance levels can be detected using the Fibonacci retracement indicator, which allows traders to find out a likely trend alteration.
Indicators That Make The Movement Of Price Analysis Simpler
Trading indicators are the elements that are used to interpret the actions of a market, how the price shifts in response to a specific market condition. Trading indicators are formed using mathematical evaluations of the specific digital currency’s historical price data and trading volume to forecast the market trend. There are varied technical indicators like fib retracement, Bollinger bands, moving averages, etc., that are available for the best digital currency forecast. They perform three folded operations of prediction, confirmation, and forming alerts for traders and investors when entering the market and making the required moves.
Problem of Cryptocurrency Price Prediction
In the past decade, crypto has emerged in the financial sector as a key factor in the financial market and business opportunities. Accurate predictions help the cryptocurrency investors move towards the correct investing decisions leading to potential increased profits. Additionally, they also support the policy makers as well as the financial researchers in deeply studying or analyzing the cryptocurrency market behavior.
Nonetheless, the crypto price prediction is believed to be a very challenging task owing to its complex and chaotic nature. The deep learning models of predicting cryptocurrency prices are not efficient to solve the complex problems of the crypto coin prediction complications. Thus, it may be stated that it is essential to invest and incorporate latest techniques, strategies as well as alternative approaches like advanced ensemble methods, sophisticated prediction algorithms, features engineering techniques and several other validation metrics.
The crypto market comprises several variables that cannot be adjusted into one single chart. Hence, there are many parameters in the market; the cryptocurrency price prediction platform selects them as per their preferences and evaluation. At Crypto Venture News, the best digital currency forecast website, try to precisely educate all the technical indicators to determine the crypto prices. However, a trader does not avail all of the indicators for digital currency forecasts as most of them replicate each other. Availing all of them would repeat the same portion of the industry. Also, no indicators can forecast the future with much accuracy as it is a highly volatile market; they only assist traders to observe trends for evaluating the direction and strength of the factors. Therefore, choosing the indicators precisely to make the apt crypto price prediction considers the prominent landscape of the market conditions.