Since its insertion into the crypto space, Bitcoin remains a well-known cryptocurrency and grows daily with users venturing into its investment. However, it is essential to note that the market is still volatile and thus requires understanding the token's technical analysis.
When you take crypto as a guessing game, it becomes a dangerous endeavor. As such, the importance of technical analysis.
We explain for an easier understanding of the basics of Bitcoin and the essentiality of technical analysis to help you make informed investment decisions.
Why Choose Bitcoin?
As a newbie in the space, it may become hard to choose reliable cryptocurrencies from unreliable ones. In recent times, there has been a rise in crypto tokens, primarily dubbed meme coins, which have shown no stance in the market. As a result, they cost rookie investors many of their investments.
However, Bitcoin seems a safer alternative to invest in. It came in the mi as the first deflationary crypto coin to exist and reached an all-time high of $65,000 per Bitcoin.
But why choose Bitcoin?
Here are some reasons for you to have some trust in Bitcoin.
It is the most decentralized cryptocurrency
It is a deflationary token
Its whitepaper is available to the public
Institutes a Proof-of-Work (PoW) mechanism
Has its tokenomics stipulated.
Bitcoin Technical Analysis
Coming as a line of investors, Bitcoin investors are of two types;
There are the HODlers, the investors who buy Bitcoin intending to hold it for several years.
There are traders who buy Bitcoin with the intention of selling at a profit.
Coming into the play as either of them, technical analysis is crucial for you as an investor.
Simply put, technical analysis is a tool in crypto using the concept of price patterns from the past and technical indicators. They try to analyze the charts and foreshow the future movements in price.
When used for Bitcoin, technical analysis can help you predict the lows and highs of Bitcoin prices over different periods. Such predictions assist you in making educated and data-driven decisions on buying Bitcoin at a reasonable price and selling at a profit.
Technical Analysis Indicators for Bitcoin
1. Moving Average Weighted (MAW)
Moving averages are popular tools used by active traders to measure momentum. They are in three forms: simple, weighted, and exponential. The weighted moving average is one of the fastest among them. It measures the overall sentiment felt throughout the market. This is done by analyzing the price fluctuations in the occurrence of the short, mid, and long-term moving averages.
Calculating the moving average is through finding the average of the data points on a given period.
2. Relative strength Index
The RSI indicates momentum. Its process is mainly by comparing the magnitude of the recent growth to recent downturns to measure the speed and change of price movements. It takes its trends between 1-100. In technical analysis, it is evident that RSI should be below 30 for buying and over 70 for selling.
Final Thoughts
You may have heard of the good things that come with Bitcoin trading, and you probably want to get involved. However, understanding the crypto space is essential before kicking off your trading.
Doing your research is handy when finding a suitable token or project. In the same case, the technical analysis offers a prospect of what you should expect in terms of price movements.
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