Understanding Crypto Markets & Crypto-specific Indicators

In the trading field across several industries and instruments, including cryptocurrencies, indicators present a procedure for traders to analyze assets from technical and fundamental viewpoints.

The technical perspective provides the analysis with tools that perform calculations over historical and present speculative values of assets to measure momentums, average data points, and count transactions attempting to understand the market context and obtain a bullish or bearish signal.

The fundamental outlook offers information about the actual values of assets by assessing project performance and proposals. This type of analysis can also include news and economic indicators such as inflation, interest rates, etc.

Crypto Markets And Specific Indicators

Although there are suitable indicators for all types of assets and markets, there are also indicators tailored for specific instruments and industries. Beyond technical analysis, industries' specific indicators may have additional correlations to fundamental factors. For example:

• Stock traders can analyze quarter accountability and companies' earnings or indices performance of a whole industry.
• Commodities traders may focus on refineries and the energy sector stocks.
• Forex/metals traders would be interested in interest rates, gross domestic product growth, non-farm productivity, and employment data.

In the context of crypto markets, digital coins alike carry their specific metrics and indicators, such as the following:

On-chain data

Broader measuring over multiple blockchain factors and activity, being the most useful for market analysis of those representing transaction volume, active addresses, hash rate, and market capitalization.

Exchange volume

Refers to the total trading volume measurable in an exchange platform during a given period, providing insights into the amount of coins bought and sold.

Wallet transactions

Meter the number of transfers on a crypto coin network, providing information on the active wallets within a period and holders' activity, pointing to the wealth distribution and asset concentration among owners.

Furthermore, the distinctive ground of blockchain conveys unique metrics like Total Value Locked (TVL). TVL relates to decentralized finance (DeFi) and calculates the total US dollar value of digital assets deposited on a blockchain network across DeFi protocols and dApp platforms.

The Total Value Locked can influence the trading decision-making process among investors in the following ways:

• A high TVL means the utility of a network is increasing and serving the blockchain necessities, so the participants trust the projects developed across different protocols.
• A low TVL means the utility of a network is decreasing, and the blockchain is not functional for participants who begin to take their deposits out of the projects.

An example of how TVL influences the market price of a cryptocurrency is BNB, the Binance native coin, hence, for the Binance Smart Chain (BSC) network, the native blockchain of the exchange.

BNB experienced a surge in its price toward new all-time highs above 700 dollars this year, 2024, as a consequence of an increase in the network activity, which implied that those users interested in participating in the Binance Smart Chain needed to buy BNB, causing a spike in demand.

In addition, typical technical indicators like RSI can also serve for specific crypto technical analysis.

Based on the BTC price, we can explore other indicators.

RSI

It is an index that detects overbought and oversold levels for values of 70 and 30, respectively, between a range of 0 and 100.

For example, Bitcoin’s daily RSI is currently near 60 (at the moment of editing this article), meaning it does not look overbought as it has been previously in an uptrend.

200-Week Moving Average Heatmap

Bitcoin price heat map based on the 200-week moving average reflects its long-term trend. Throughout history, BTC has spent little time below the 200-week moving average, which indicates that this area usually acts as a bottom.

This indicator works as follows:

• Show colors proximate to red when the price is well above the MA line and in blue when it is close.
• Colors close to red on the heat map usually indicate good selling times, while colors close to blue indicate buying times.

60-Day Cumulative Increase

It is a top valuation that represents the cumulative daily sum of rise and fall in the past 60 days of Bitcoin, such as follows:

• Positive numbers around +100% represent a cumulative increase.
• Negative numbers -100% denotes a cumulative decline.

The cause for this is that when the price rises too fast in the short term, there will be a large increase in profitable selling.

Cumulative Value-Days Destroyed (CVDD)

It is a bottom valuation that measures how long BTC holdings have been stored before they were moved, tracking the cumulative sum of the value-time destruction as coins move from old hands into new hands as a ratio to the market age.

This indicator determines that when holders' movements increase, it may imply selling pressure.

2-Year MA Multiplier

This metric multiplies the 2-year moving average by five since the price has tended to rise by that amount in uptrends. The multiplication by five is of this moving average over the price values, not over its period.

By using this indicator, investors assume the following interpretations:

• When the price falls below the 2-year moving average, it offers a potential buying moment, as historically has done.
• When it exceeds the 2-year moving average multiplied by 5, it indicates the time for taking profits, as historically has been.

Bull/Bear Cycle

The Bitcoin Bull-Bear Market Indicator is a momentum indicator that gives insight into the current outlook. It measures the difference between the profit and loss ratio of investors based on a 365-day moving average.

According to this metric:

• A bull market above 0 is when investors are mostly in profits.
• A bear market below 0 is when they are in losses.

Conclusion

Beyond the general technical and fundamental tools to analyze traditional securities, the unique realm of crypto markets compels specific methods to analyze the price data and context of digital coins. Such is the case for on-chain analysis from a fundamental perspective or TVL, CVDD, and 2-year MA from a technical standpoint.

In Altrady you can implement a wide range of other indicators, including RSI, to analyze Bitcoin and multiple altcoins. Grab this free trial account and sign up today.