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The total crypto market cap doubled in 2023, which suggests that the asset class has
already exited its “winter” and is now amid a transition. What is the crypto market
outlook for 2024? We take deep dives into the latest crypto forecasts from industry
leaders and explain how to predict cryptocurrency price trends.
Before we analyze how to predict crypto trends, let’s look at a few of the items that
just might happen in 2024, and what these developments might mean for the
crypto sector moving forward. Perhaps the least risky crypto prediction for 2024 was
that a spot bitcoin ETF would be approved, a highly anticipated positive
development for the sector that drove some of the 2023 gains.
There are several explanations for why Bitcoin increased in value by over 160% in
2023. This includes the expectation of Bitcoin's "halving" event, which is anticipated
to take place in April 2024, the optimism felt throughout major U.S. financial
markets, and the hope that the Securities and Exchange Commission (SEC) would
approve a spot Bitcoin exchange-traded fund (ETF) in January.
Particularly significant have been the last two triggers. However, the speculation that
these events will take place in 2024 has already caused Bitcoin to soar by nearly 160%.
For the biggest cryptocurrency by market cap, this year has all the makings of a "buy
the rumor, sell the news" scenario.
In addition, Bitcoin still struggles with relevance. The experiment of using Bitcoin as
workable money in El Salvador hasn't been well received by the locals. Just $126
million of the more than $7 billion in remittances that were received into El Salvador
from overseas in 2022 ended up in Bitcoin accounts. According to industry experts,
other crypto projects have surpassed Bitcoin in terms of network and usability,
therefore its competitive advantages have diminished.
#2 Crypto Prediction: Ethereum is overdue for a run?
Ethereum largely remained in the background in 2023 as Bitcoin and numerous
other cryptocurrencies experienced surges in popularity. Although it increased by an
impressive 80%, it was not one of the best cryptocurrencies to buy, when we look at
other well-known altcoins such as Avalanche, which increased by 250%, and Solana,
which increased by more than 900%.
Ethereum is still the best blockchain for cutting-edge cryptocurrency use cases like
yield farming, NFTs, decentralized banking, and more, even with its dismal
performance in 2023. Considering the additional value that EIP-4844 will offer to the
ecosystem, a popular crypto prediction for 2024 is that Ethereum will remind the
crypto community that it is the birthplace of decentralized finance.
The main issue with Shiba Inu and Dogecoin is that they are merely payment
currency. In theory, one might use any of the millions of digital currencies available to
pay for goods and services. There is just nothing that sets the two dog-inspired coins
apart from the countless other efforts.
Shortly following this historic crypto crash, we witnessed the fraud at the
cryptocurrency trading site FTX. Sam Bankman-Fried, the former CEO of FTX, was
found guilty on seven counts of fraud and conspiracy against him, less than a year
after FTX filed for bankruptcy protection.
Additionally, there have been rumors that Tether (USDT 0.00%), the biggest
stablecoin by market capitalization, may eventually fail and de-peg from the dollar.
Tether has repeatedly failed to open its books and disclose precisely what assets are
backing its $91 billion stablecoin. After watching a handful of other stablecoins fail to
hold their peg to the U.S. dollar, the downfall of Tether, although playing a key role in
the DeFi sector as well as crypto trading on decentralized exchanges, could be
crypto's black swan event of 2024.
Payment processors have also taken several actions to permit, expedite, or at the
very least support tokenized payments in addition to TradFi banks. Among the
initiatives is the ongoing growth of cryptocurrency goods and services at PayPal, a
well-known brand in the US with a lengthy history in the industry that dates back to
2014.
Proponents of cryptocurrency have long recognized the economic case for tokenized
payments, and as large financial institutions come to realize these advantages, it
appears logical to assume that adoption and implementation will continue.
But before trading cryptocurrencies, individuals should research and try to predict
future trends based on the available information. However, forecasting requires
analysis. How can investors forecast cryptocurrency prices? It is a common
misconception that cryptocurrency prices are linear. This assumption ignores the
many factors that affect a coin's price. There can be sharp price fluctuations in
cryptocurrencies.
Perhaps you are wondering which type of analysis is best and how macroeconomic
and microeconomic conditions impact cryptocurrency markets. Or maybe you have
questions about the value of variables. This article will explain the entire process of
analysis from a forecasting perspective to help you filter the online cryptocurrency
price predictions offered by agencies and maybe conduct your own cryptocurrency
forecasts.
● Technical analysis refers to the study of statistical trends using indicators like
historical price movements, patterns, and price charts.
● Sentiment analysis puts the trader’s sentiments and emotions into predicting
the crypto price trends. Instead of relying solely on market data, crypto
analysts focus on emotional trends like panic selling or a purchasing spree
based on public expectations and perceptions.
The technical analysis depends on the idea that crypto prices follow trends and
repeat themselves. Therefore, analysts focus on examining the price movements and
trading volumes to forecast the future directions of crypto prices, whether it will go
up or fall in the future. Technical analysis is used for short-term crypto price
prediction.
However, cryptocurrencies are not like stocks and can’t be analyzed using the same
metrics. Since cryptos are widely unregulated assets, they don’t submit to the same
regulations as do international companies, and thus they don’t submit any financial
reports. This is, in contrast, to publicly traded companies, which often must submit
quarterly reports following recognized accounting standards. Traditional business
metrics such as liquidity ratios, which measure the solvency of traditional companies,
are no longer relevant. The essence of blockchain projects and cryptocurrency,
respectively, is that no one company or entity should own or be responsible in any
way for the project. All transactions in crypto markets can be publicly "audited" via
blockchain. The founding team must also keep the community updated about their
plans.
Investors use fundamental analysis to try and determine the intrinsic value of an
asset. By using the fundamental analysis and looking at both internal and external
factors, it may be possible to determine if an asset is undervalued or overvalued. This
can be achieved by analyzing qualitative factors like the state of the economy and
cryptocurrency market conditions, as well as the management and market
capitalization of crypto companies.
The traditional fundamental analysts look at business metrics such as earnings per
share and price-to-book ratio. This information can be used to help them
strategically exit or enter positions. However, when performing fundamental analysis
for cryptocurrency projects, you are considering as many external factors as possible
that may affect the performance of the cryptocurrency’s price. Long-term investors
should spend a great deal of time analyzing the project’s fundamentals before
investing in cryptocurrency.
While these metrics (on-chain, project, and financial metrics) don’t paint the whole
picture, they are able to give us some hints for creating indicators.
On-chain metrics
As the name implies, these are the blockchain metrics. For blockchain networks, the
best way to extract all metrics needed is directly from the network, and anyone can
do that by creating a new node on the network. However, if you’re only looking to
extract on-chain metrics to serve in your future investment decision-making process,
then it would make no point to create a blockchain node. This is a time-consuming
task and requires quite a few resources, especially for Proof-of-Work (PoW) networks.
Luckily, there are multiple free resources online that may provide on-chain analysis,
such as the CoinMarketCap analysis. Here’s an example of what Bitcoin on-chain
analysis looks like: https://coinmarketcap.com/currencies/bitcoin/onchain-analysis/.
● Transaction count: This metric will give you an idea of the on-chain activity.
However, the transaction count could also be misleading, as someone could
simply move the same funds between two wallets, and each time would be
counted as a transaction.
● Transaction value: This value gives you the value of all transactions executed in
a set period. Oftentimes, networks brag about their daily transaction volume,
but this too can be rigged.
● Active addresses: This metric represents the total address used over a period.
Note that both the sender and the receivers' addresses are counted, but some
networks offer a unique number of blockchain addresses used in a specific
period.
● Fees paid: This number may give a more accurate image of the true demand
of the network. The fees represent fees paid to get your transaction through,
and the sooner you need a transaction confirmed, the higher the fee will be. In
the case of PoW networks, fees tend to increase over time as part of the
reward mechanism. Everything is tightly knitted, and the fees paid to
validators or miners need to be balanced with the block rewards.
Hash rate and staking: The hash rate metric should be rising, and it’s only valid for
PoW blockchains. A higher hash rate means a more secure network and a growing
interest in mining, which may relate to the price of the blockchains’ coin, an increase
in transactions, and overall higher profitability. On PoS networks, the hash rate metric
is replaced by the number of staked coins.
Project metrics
These metrics are the easiest to observe, and investors should always look for
transparent projects that deliver value to the community. Some of the things you
should keep an eye on are the founding team, the project’s whitepaper, and the
roadmap.
The team: Investing in projects led by knowledgeable and skillful team members is
always an advantage. Knowing the project’s team and studying their past endeavors
can tell investors if they have what it takes to make this project a success. That's why
it’s important to document past accomplishments and experiences. This will give
insight into the team that you trust to follow the roadmap. To assess credibility, you
might also consider early backers and advisors to your project. However, not all
projects have declared the team that’s building the project. In this case, you should
check the developer community on GitHub and check out the latest developments
and updates.
The whitepaper: All serious projects will have a detailed whitepaper. This is a
technical document that explains the technology used, the use cases, the
tokenomics and paints an overall picture of the project. The paper should always
include the blockchain technology solutions, use cases for the currency, planned
features and upgrades, token economics and sale information, and team
Information.
Tokenomics: This chapter is often included in the whitepaper and presents the use
cases of the project’s coin. But regardless of what the project's creators say about it,
each investor should carefully analyze the provided info and decide if the coin has a
real utility. There should also be information about the initial distribution of total
supply and other details. It’s important to have funds distributed in such a way so
that no part can easily manipulate the market.
Roadmap: The roadmap for most cryptocurrencies as it shows the timeline for
release, testnets, and new features. The roadmap should provide a clear overview of
future developments. The road map can be used to determine milestones.
These are all valuable tools for crypto fundamental analysis. They can be especially
useful when assessing the prospect and forming an investment plan.
Information about the coin’s financial history, as well as the economics of the
blockchain, is useful information for future investors.
Market capitalization. The market cap is the cost of all existing coins that are in
circulation at a given time. This number is the result you get when multiplying the
current price of the asset with the total circulating supply. However, the true issue
here is that nobody can tell precisely how many coins are really circulating, as some
may be in lost wallets or burnt. However, the market cap has often been used as an
indicator of the growth potential of the blockchain.
Liquidity and volume. On any trading market, liquidity and trade volume are
interrelated terms. This is because trade volume can be used to measure a
commodity's liquidity. A greater trade volume means that there is more market
interest.
Supply mechanisms. Each blockchain may have a different supply mechanism,
meaning that there’s an algorithm that influences the maximum supply, the
circulating supply, or the inflation of the market. All these can have short and
long-term effects, and investors may react in different ways to them.
The problems with cryptocurrency fundamental analysis
Unlike the stock market, when performing the fundamental analysis for any
cryptocurrency market, the metrics may not tell the whole story. That’s simply
because the cryptocurrency market is still new and many of the popular projects are
still in development.
However, potential future investors should look at indicators to gain deeper insight
into the fundamentals of a coin.
Indicators often combine multiple metrics using statistical formulas in order to make
it easier to understand them. Although knowing the number of active wallets is a
valuable piece of information to have, combining it with more data could be even
more insightful, such as the average amount held in a wallet.
These metrics and indicators can be gathered using fundamental analysis tools. You
can view the raw data from blockchain explorers but an aggregator, or dashboard, is
more efficient. You can even create your own indicators on some of these tools.
You can also use media coverage and user adoption rates to help you predict
cryptocurrency movements when conducting fundamental analysis.
Other things to consider are scarcity, mainstream adoption, and regulation when
predicting the cryptocurrency's price.
It’s important to note that there is no one method that can be used to analyze
technical data. Every trader will use different indicators and interpret them
differently. Not all technical analyses can be considered 100% accurate.
The technical indicators used by analysts are calculations of the asset’s historical
price. These indicators are shown on the asset’s price chart, and they help traders
identify market trends.
Most traders would agree that you would need five to seven indicators to perform
technical analysis for any given cryptocurrency. These technical indicators should
provide enough information to help you make informed decisions, but not so much
that you become paralyzed by analysis.
While the most used combinations of technical indicators for trading can be
anything up to seven, it's up to you to decide what is the best combination. It doesn't
mean you have to use the same tools for every technical analysis. However, it is
advisable to limit the number of indicators used at a given time. However, for longer
time frames, you might use more indicators, but you should also be informed about
the long-term fundamentals.
Using technical indicators will help you identify crypto trends, and the support and
resistance levels, mark the historical highs and lows, and plan your market positions.
Technical analysts and day traders use charting tools to generate signals that allow
them to buy, sell or indicate market trends. There are two types of basic technical
indicators:
Overlays technical indicators. These indicators use the same scales as prices and are
plotted above the stock charts' prices.
Oscillators. Instead of being placed over a price graph, technical indicators that
oscillate between the local minimum and maximum are plotted either above or
below a chart.
To generate trade ideas, traders may combine technical indicators with subjective
forms of technical analysis, such as chart patterns. Because of their quantitative
nature, technical indicators can be integrated into automated trading systems.
Remember that indicators can’t tell the entire story, and a trader should also be
aware of the underlying fundamentals.
Understanding charts
Chart patterns are the basis of technical analysis and are, without doubt, one of the
most valuable tools for price chart analysis.
Chart patterns are a type of shape found within a price chart that can help to predict
what prices will do next based on past performance. Chart patterns are essential for
technical analysis. They require traders to be able to identify what they are looking at
and what they are seeking.
As a crypto trader, you’ll need to understand how to read a candle patterns before
using them to build trading strategies.
Because they are clear and understandable, charts help us to understand market
sentiment. For instance, if we have a chart of candles with no wick, it suggests
strong, decisive bullish/bearish sentiment, with sellers or buyers in control. On the
other hand, candles made out only of the wick could mean that prices could move
back and forth but end almost unchanged. They could indicate indecisiveness or
balance between buyers and sellers.
The two styles most widely followed are Japanese candle and Western-style chart
patterns.
Classic Western Reversal Chart Patterns – Head and shoulders, double top, double
bottom, rising wedge, falling wedge.
Classic Western Continuation Patterns – cup and handle pattern, Pennant patterns
(or flags), ascending triangle, descending triangle.
Chart Patterns That Can Be Continuation or Reversal – symmetrical triangle.
Remember that chart patterns are part of technical analysis. They are not a
guarantee of a market moving in the predicted direction. Instead, they can be used
to indicate what might happen to an asset’s price.
Technical indicators
There are five types of technical indicators for trading – Trend Following, Momentum,
Volatility, Support/Resistance, and Volume. These indicators will give a lot of insights,
from showing the average currency pair's price over time to providing an easier view
of support and resistance levels.
As you’ll begin to study technical indicators, you will learn about the most used kinds
of indicators:
Trend indicators: Moving Average (MA), Ichimoku Kinko Hyo, Average Direction Index
(ADX), Parabolic SAR.
Momentum indicators: Stochastic Oscillator, Moving Average
Convergence/Divergence (MACD), Relative Strength Index (RSI), Commodity Channel
Index (CCI).
Volatility indicators: Bollinger Bands, Average True Range (ATR), Standard deviation
Support/Resistance Indicators: Pivot Points, Trendlines and channels, Fibonacci
retracement.
Volume indicators: Rate of Change (Volume), On-Balance Volume (OBV), Force Index,
Accumulation Distribution, Chaikin Oscillator, Money Flow Index, Chaikin Money
Flow.
Other indicators: Elliott Waves, Gann, DiNapoli, and similar studies are timing or cycle
indicators.
Market sentiment is the way that investors and traders evaluate the emotions and
attitudes of others toward a crypto asset. The financial market does not use
systematic or technological evaluation to determine sentiment. It reflects the
collective psychology of all those involved in cryptocurrency trading. This is revealed
by trading metrics and social media. Analyzing the market sentiment in digital
currency is essentially a psychological assessment of many factors that have a
massive impact on the asset's price movements.
The emotions of investors about certain digital assets can have a tangible impact on
market cycles and the value of crypto assets. It will have significant consequences if
many investors and traders act on the thoughts, ideas, and feelings they express,
regardless of whether they are based on factual information.
One of the most famous situations concerns a highly appreciated online personality,
Tesla’s CEO. Elon Musk's tweets had a significant influence on the price of Bitcoin
and Dogecoin price, which in turn created a bullish sentiment.
However, the market sentiment is only a part of the picture and should not be
considered on its own without performing fundamental and technical analyses.
Bullish percent index (BPI). This index measures the percentage of stocks that exhibit
bullish patterns. If the BPI reaches 80% or higher, market sentiment is considered
high-spirited. This means that an asset's value is overvalued. A positive percentage of
50% is considered neutral. If the BPI drops below 20%, market sentiment is
considered negative and indicates that the marketplace has become overbought.
The volatility index (VIX). Also known as the fear index, the volatility index is
determined by the prices on the financial markets. An increase in VIX indicates a
greater demand for insurance on the market, while increased volatility means that
traders and investors feel the need to protect themselves from the risks. Moving
averages are also used to assess the volatility index.
The 50-day and the 200-day moving average (MA). If the 50-day MA crosses the
200-day MA, it means that the market has moved in an upward direction. This is
commonly called the "golden crossing," which results in high optimism and
confidence within the financial markets. When the 50-day MA crosses below the
200-day moving average, it is considered an indication that the asset's value is likely
to fall. Investors and traders will be pessimistic.
Cryptocurrency price prediction - Conclusion
Cryptocurrency price prediction is not an exact science, and it will take a lot of
practice to begin to master the tools and indicators used by professional traders. It is
a great subject for study due to its low entry barrier and availability of data. However,
it is possible to attempt to predict some movements in the cryptocurrency market. In
order to do so, you will need to be familiar with both the fundamental and technical
analysis.
These analyses have been picked up from the world of traditional trading, and
traders and investors should be aware of the nature of cryptocurrencies when
performing these analyses. However, an investor or trader needs to gather the views
and opinions of all those involved in crypto or any other financial markets to gain a
better understanding of the market's sentiment. Although market sentiment
analysis can be helpful, you shouldn't rely just on that. All of the aforementioned
factors should be considered when deciding on a new investment.
As always, remember that the cryptocurrency market is highly volatile and poorly
regulated. There’s always a risk of hacking when trading on a cryptocurrency
exchange. You should never invest more than you are willing to lose. It may be in the
best interests of investors to focus more on cryptocurrency stocks and blockchain
stocks and generate revenue from the blockchain trend.