Cryptocurrencies are gaining massive popularity as an investment class. Every passing day, more and more people are expected to become a part of the market.
However, crypto tokens are well-known to be highly volatile assets, and it can be challenging and confusing to read the market and know when is the best time to buy or sell a token.
This article will help you understand some key crypto market indicators that play a pivotal role in determining whether a crypto token will rise or fall.
Key Crypto Market Indicators That Dictate The Crypto Market
There is no definite way to predict the cryptocurrency market. However, there are some technical indicators and analysis calculations that can be used to spot trends, warnings, and patterns in the market to help you read the weather and prepare for a cryptocurrency’s rise or fall.
Keep in mind that a single indicator cannot signal a price reversal or confirm a new market trend, but a combination of various market indicators can be used to identify signals that typically cause a token’s price to rise or fall.
Another way to assume the future price movement of a cryptocurrency is to analyze its historic trading and price activity.
Here are some technical indicators that you can adopt to create your crypto trading strategy
- Technical Analysis Indicators
Technical analysis indicators are traditional trading tools that can be used to assess when a given crypto token’s price will trend upwards or downwards. Cryptocurrency exchanges build this tool onto their price chart to help traders assess whether it is a good time to buy or sell.
- Moving Average (MA)
This indicator is used to calculate the price averages of a cryptocurrency over a specific period and identifies crypto trading patterns. The most common periods that traders look into are 200-day, 50-day, and 20-day moving averages.
- Simple Moving Average (SMA)
This indicator is used to track price trends that tend to not change direction very quickly (less volatile) and gives traders a picture of long-term price trends. The most popular tool for identifying the support and resistance trends of a cryptocurrency is the 50-day SMA.
- Exponential Moving Average (EMA)
The Exponential Moving Average is an indicator that tracks real-time price changes and gives more weight to recent price action.
- Bollinger Bands
This indicator shows a token’s price volatility in three different parts. It uses a 20-period SMA and two bands that illustrate the positive and negative standard deviations from the Simple Moving Average (SMA).
- Moving Average Convergence Divergence Indicator (MACD)
MACD is a popular crypto trading indicator that identifies when moving averages are moving towards or apart from one another. It highlights when a cryptocurrency’s price is changing in direction, momentum, strength, and also the duration of the price trend.
- Relative Strength Index (RSI)
RSI is an indicator that identifies a token’s strength or weakness based on its recent price changes to know whether it was oversold or overbought. The indicator can signal divergence and warn of trend reversals.
RSI is normally measured over 14 days on a scale of 0-100. If the crypto drops below 30 on the scale, then it is deemed oversold. Any score above 70 on the RSI signals that the particular cryptocurrency is overbought.
- Social Media Indicators
Just like the technical indicators, it is also important to follow and evaluate traffic for a token on social media and search engines to predict when its price will rise or fall. If a crypto project announces a partnership or gets promoted by an influencer, then its price can increase.
Following the crypto projects that you are interested in investing in on social media can work wonders.
- Fear and Greed Index
Fear and Greed Index is something you need to pay attention to. This indicator measures the market’s sentiment for a cryptocurrency and can signal when investors have a fear of missing out (FOMO), triggering a buying frenzy.
It identifies market sentiment on a scale of 0 to 100, with 0 being extreme fear and 100 being extreme greed. When the Fear and Greed Index for a token shows high greed, its prices go up, and when investors are fearful about the prospects of a token, then its prices tend to go down.
What Factors Can Cause A Cryptocurrency To Rise And Fall?
Several factors dictate whether a cryptocurrency is set to rise or fall in value. Let us take a good look at them.
1. Reasons that can cause a cryptocurrency’s price to Rise
2. Reasons that can cause a cryptocurrency’s price to drop
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