The latest happenings in the market of cryptocurrencies have raised the interest of many in mining, but even more, investing and trading. At the beginning of 2020, quite a lot of predictions were made about the possible rise in the value of certain coins. Not many believed in this story though, because since 2017. not a lot of things happened to raise hope and interest in trading. By the end of the year, those non-believers turned out to be very wrong for not believing, because bitcoin price started climbing the ladder, reaching its all-time high, more than once. At the same time, it had a couple of falls, but they were so insignificant because the value never fell below the initial all-time high.
Even those who predicted the rise might happen were left in a state of shock because even they did not expect the price to rise that much. The predictions for this year are still positive for bitcoin, although we have seen that some currencies experienced fall, and predictions are still not clear what will happen with them. The time will tell.
This short introduction is to make the readers aware of how unpredictable the cryptocurrency market is, therefore how difficult it might be to predict the prices of the coins. Difficult doesn’t mean impossible.
Before we continue with price predictions, there are a couple of basic things to understand about crypto.
1. They are almost control-free
Unlike traditional currencies that are tightly connected to monetary rules and regulations of a country or a union, usage of these coins is only controlled by the free will of the people, which is the reason why they are so widely accepted. Even though the vast majority of these people do not understand the technology they’re based on and look at them simply as a means of speculation, many find them attractive due to their origin.
2. Key characteristics
When it comes to being familiar with the basics, here are some of their key characteristics:
- DECENTRALIZED – flat hierarchy without a central authority (peer-to-peer), non-existence of institutions, empowerment of end-users and their economic freedoms, disintermediation – the expulsion of intermediaries that do not provide significant added value,
- LIMITED VOLUME – there’s only much the market can give. Or in other words, there is an upper limit to the expansion of the currency, therefore making inflation impossible. The amount of coins is not unlimited, and its creation requires investment in equipment and electricity.
- SAFETY – authorized transactions are verified and permanently stored in the public register that is practically unchangeable.
- TRANSPARENCY – each transaction performed is publicly visible and as such can be revised by everyone. In addition, the system program code is open-source.
- PERSONAL DATA PROTECTION – although transactions are public, there is no personal information regarding who made them. Addresses are protected, and the system is anonymous.
- SIMPLE TRANSACTIONS – transfers are entirely simplified and are similar to sending an e-mail. The whole capital can fit a single memory stick.
All these key characteristics are what makes these currencies so appealing to people of all ages. According to australiantimes.co.uk these blockchain technology-based currencies are mostly being used by the younger population, due to the fast transaction speed and simplicity they offer.
In the end, knowing all these key characteristics, what do you need to do to be able to predict the prices on such a volatile market. Below are a couple of suggestions.
Learning is inevitable, even though many will not like it. Since the market is so unpredictable, it is essential to read as much material as possible to familiarize yourself with the basics and how they function. If you want to be successful in trading, mining, or whatever you choose, you need to invest time.
As complicated and boring as it may seem, it’s not as it seems. There are tons of methods you can use to access knowledge, besides reading. If you’re more of a listening type, use the podcast as a source of information. Top people from the financial industry have made a lot of high-quality material about the subject, that can help you digest information easier. Or, enroll in a course, or even a webinar, to have a structured learning approach.
By no means you should enter these waters and invest money, without knowing how things function.
4. Historical analysis
If you want to be able to predict prices, the smartest thing to do is analyze the history of past price movements. It will tell you which coins have managed to successfully stay on the top 10 list, and why. Did they have any major price movements, and when? Which are connected, or influenced by which. How do changes in fiat currency value influence crypto, and which are connected to which?
By analyzing the past, it is possible to create expectations from the price of certain coins.
5. Stay informed via news
Following the news is a good source of information about what other professionals in this area are predicting. Lots of things influence the price of crypto, such as politics, regulations, but the most influence is in the people investing in a certain coin. Its value (price) will be largely determined by the number of people investing in it. That’s why following the news and the market movements is your number one tool.
It’s important to understand there is no such thing as a single approach to predicting the price of crypto. All three pieces of advice given have to be constant, therefore you cannot have one single approach that will suit all the circumstances on a market this unpredictable.
When you think about predictions of the price you can have an asset-based or a factor based-approach. The first one relies on predicting the price of a single coin of your choosing by focusing on its performance based on certain criteria. While the other focuses on predicting the price of a group of coins in a specific moment, based on specific criteria.
Regardless of their volatility, the journey of predicting can be quite exciting, once you get into it.