Is it possible to Predict Crypto Trends?

Investing in cryptocurrency is a proven effective way of making a profit in the modern world, and already 28% of American adults have owned at least one type of digital asset during their lifetime with many more suggesting they have intentions of investing in the future. That being said the majority of coins, with the exception of a few, are highly speculative assets. The crypto market exists in constant flux, with little stagnation, and as such, it is necessary to know how to navigate this changing market in order to invest and trade crypto effectively.

Luckily, there are a number of tried and tested tools that, when utilized correctly, can help predict changes in the market before they take place. Of course, when it comes to cryptocurrency, nothing can be predicted with 100% accuracy, and there is always the risk of an investor losing everything they invest, but as long as that is understood, there is a lot individuals can do to try and stay ahead of a rapidly changing environment.

In this article, we’ll explore why the crypto market cannot be predicted with one hundred percent accuracy before analyzing some of the most effective ways to stay in the loop about the rapidly changing crypto market.

Table of contents:

Key Takeaways

Predictions can’t be made on the crypto market with 100% accuracy because digital assets are volatile and affected by countless factors.
Staying in the loop can help you predict crypto trends.
Both new and emerging coins and crypto with the most potential are worth keeping an eye on.
Fundamental analysis involves taking every factor into account when attempting to predict the intrinsic value of a currency.
Technical analysis involves using technical indicators to try and predict the future behavior of an asset.
The volatile and decentralized nature of crypto will never change.

Exploring Why Crypto Prediction Can’t be One Hundred Percent Accuracy

Cryptocurrencies, with the exception of stablecoins, are highly volatile. In this context, volatility refers to the tendency a digital asset has to rise and fall in value over time. In essence, when a certain crypto has more attention, whether it be more people investing, high media coverage, or related breaking news, that asset’s value will increase. When the attention inevitably tapers off, the value of the currency will decrease once again, but it can later be increased should attention fall on it again.

Because of this, it is impossible to predict crypto trends with one hundred percent accuracy. For example, something big could happen in the world of crypto, say a prominent government official could endorse or condemn a certain coin, and its value would be affected.

That being said, there are a few different tools that can be utilized to help predict crypto markets with some level of accuracy. Although these can never be 100%, they have been repeatedly proven to aid an investor in predicting a market that seems, otherwise, a tumultuous place.

Keeping in the Loop

One of the easiest and most effective ways to predict changes in the crypto market doesn’t actually use any tools beyond the investor. As we’ve explored, the crypto market is greatly affected by current events, emerging trends, and media attention. With that in mind, the best way to keep on top of this market is to do everything you can to stay in the loop.

There is a wide range of crypto news sites, as well as countless crypto coverage on regular news platforms that can help investors keep up to date with any changes that are likely to affect the market. If possible, investors can have these sites set to notify them should any news emerge regarding any crypto coin they are specifically interested in.

Additionally, it’s a good idea to stay up to date with any and all new and emerging coins as well as crypto coins with the most potential. These coins often have a lot of build-up, with many investors actively interested in how they will evolve. Coins with a lot of potential are likely to rapidly increase in value in the short term, but, when named so, still have a low price, so it’s a good idea to get your hands on them before they skyrocket in value.

However, despite being the easiest way of predicting changes in the crypto market, simply trying to stay in the loop is the least reliable. You are certain to learn important information that can help inform your investing choices, but this information will be limited, and should you want to keep track of multiple coins, this can quickly become very time-consuming.

The Next Step: Fundamental Analysis

Keeping in the loop is an effective way to predict market trends, but it is an activity that is likely to appeal to the more casual crypto investor. Those who take crypto trading more seriously are likely to be looking for something with a little more proven accuracy. This is where fundamental analysis can come in.

Fundamental analysis is a process of analyzing both quantitative and qualitative factors that may affect the intrinsic value of a crypto coin. This works similarly to how traditional investors analyze stocks and companies but with the added difficulty of keeping crypto’s volatility and widely unregulated nature in mind.

Crypto coins and companies don’t tend to submit financial reports that can then be utilized by investors, so crypto enthusiasts need to be a bit more creative in how they gather and analyze their information. Because of this, investors use fundamental analysis in an attempt to discover the intrinsic value of a particular asset. This involves looking at both the internal and external factors that are in play regarding that asset, similar to what investors do simply by keeping in the loop, but taking this one step further. There are several different things fundamental analysts will keep in mind, including but not limited to:

White Paper- this is the cryptocurrency’s foundational document, created by its inventors and outlining the project’s desired outcomes and roadmap.
Team- effective investors will scrutinize who is responsible for the invention and development of the currency and discover if they are trusted and credible in the crypto community.
Supply Metrics- understanding what the total supply of the crypto is, as well as its circulating supply.
Distribution- where have the coins gone so far?
Community Support- is there a lot of hype about the coin in the crypto community?
Competitors- how is the crypto performing against its competitors?

However, fundamental analysis in crypto often doesn’t provide the investor with the whole story. By only looking at metrics and aiming only to discover a coin’s intrinsic value, a lot of the volatility that makes the crypto market what it is is forgotten.

The Tools of the Trade: Technical Analysis

As can be expected, performing an effective fundamental analysis can take a lot of time and effort for the crypto investor. As such, many people prefer relying on technical analysis tools to aid them in predicting the changing crypto market. These tools are utilized by investors to help them predict a crypto coin’s price action and understand its market psychology using mathematical indicators.

Technical analysis uses technical indicators which are calculations of the coin’s historical price. The findings of these analyses can then be displayed in a visual chart which an investor can use to identify trends and make informed decisions about whether or not to invest. In general, it is agreed that a single cryptocurrency would need to supply between five and seven indicators to generate an accurate and useful analysis. Investors want these indicators to give them enough information to make a decision without overwhelming them with data. We’ll explore what these technical indicators look like later in this article.

There are a variety of different charts that technical analysts can use to help them predict a coin’s future movement, and investors must familiarize themselves with these charts, and learn how to read them, before using them as a tool to aid with investment decisions. A few of the most popular chart patterns that are used include:

Bullish candlestick patterns.
Bearish candlestick patterns.
Continuation candlestick patterns.
Classic Western reversal chart patterns.
Classic Western continuation chart patterns.
Chart patterns that can be continuation or reversal.

Of course, predicting market trends is not an exact science, and technical indicators are not to be read as gospel by investors. That being said, they are the most mathematically and scientifically aligning method of predicting future trends in the crypto market and are well worth an investor’s time and involvement.

Technical analysis indicators

As mentioned, technical analysis all begins when a certain number, usually five to seven, technical indicators have been triggered by a coin’s movement on the market. Altogether, there are five different categories of technical indicators, timing indicators, Support/Resistance indicators, volume indicators, Momentum indicators, and volatility indicators.

Let’s take a deeper look at these factors that technical analysis takes into account:

Time-frames-The behavior of an asset over an extended period or during a cycle. A few examples include Elliot Waves, DiNapoli, and Gann.
Support/residents indicators. A.K.A Price level movements- is there support that has stopped the asset from falling in value past a certain point? Or resistance that is preventing it from rising in value past a certain point. Shown through pivot points, trendlines and channels, and Fibonacci retracement.
Volume- How strong is the price movement? High volume regarding a price breakout is a positive indicator. Some examples include force index, rate of change (volume), and on balance volume (OBV)
Volatility and momentum indicators- Among other things Technical analysis tries to take into account the human psychology that affects crypt value. Experiences such as FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt) all affect crypto volatility and momentum. Some examples of these charts include moving average convergence/divergence (MACD), Bollinger Bands, and standard deviation.

Remembering Volatility

Although it is impossible to predict trends in the crypto market with one hundred percent accuracy, there are, as we have explored, a variety of methods and tools at an investor’s disposal that can make getting reliable predictions infinitely easier. Investors must always remember that cryptocurrency is highly volatile by nature and that it has no centralized and unifying company that oversees it. These coins are speculative and will remain so indefinitely, but that does not mean their behavior on the market needs to remain a complete mystery to us.

Frequently Asked Questions

It is impossible to predict crypto trends with one hundred percent accuracy, but that does not mean there is no value in attempting to do so. There are many methods and tools a crypto investor can use to help them make an educated guess on how a coin might act on the market.

Is the effort of learning how to read technical analysis charts worth it?

Yes, it may be a little time-consuming, but learning how to read technical analysis charts will give any investor the best chance of predicting crypto trends with as much accuracy as possible. These charts are designed to take everything that affects the value of a coin into account and present it to the investor in an easy-to-understand format.

Can AI help me predict crypto market trends?

Yes, many people use AI to help them predict crypto market trends because of its ability to analyze and simplify large bodies of data in almost an instant. However, like everything else, AI cannot do this with one hundred percent accuracy. Also, artificial intelligence is still likely to make mistakes, so it’s a good idea to use it alongside another method.

What affects the value of crypto?

Many things affect the value of crypto due to its nature as a volatile asset. Everything from social media hype and supply and demand to current affairs and the reputation of the company or individual who has made the coin itself.