Monday, July 22, 2024

How to Analyze Bitcoin for Maximum Profit

Are you also aspiring to become a top player in the Bitcoin market? You must be aware of various strategies you can use while trading Bitcoin. If you are a beginner, here is how to trade bitcoins to make money. 

And if you are done with all strategies and basics of bitcoin trading, here is the next level in the game: How to analyze bitcoin for maximum profit. Traders analyze Bitcoin via either fundamental or technical analysis.

Two ways to analyze Bitcoin: Fundamental and Technical

Fundamental analysis

Traders use this analysis to identify the ‘intrinsic value’ of Bitcoin. It can be done by using various internal and external factors in traditional asset classes, including fixed-income securities, equities, and commodities.

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However, specifically for cryptocurrencies, different parameters have to be assessed fundamentally, such as liquidity, whitepaper and fees, market capitalization, trading volume, and various other project metrics.

How to Analyze Bitcoin for Maximum Profit 1

Technical analysis

  • Technical analysis requires price pattern reviews of Bitcoin. It can be done using different techniques such as bar charts, line charts, candlesticks, etc. And with the application of technical analysis indicators. 
  • The technical analysis combines support, resistance levels, trend lines, moving averages, directional movement index, extension, momentum indicators, etc. Technical analysts utilize past prices of Bitcoin to predict its future movement.
  • Bitcoin’s technical analysis usually depends on statistical indicators, charting patterns, or both. Analysts most commonly use charts, including bar, line, and candlestick charts. Each chart can be created through the same information but represents information differently.

Essential tips for doing a successful Bitcoin trading 

Research work

  • Bitcoin is an infamously volatile currency, so small key events can impact the prices and move them too quickly or heavily. To be a long-lasting player in the Bitcoin market, you must be aware of these critical events that can move markets.
  • As a Bitcoin trader, before you start your day, you should go through the news events that will inform you about various exchanges and market movements. This is a crucial aspect required to understand How to analyze Bitcoin.

Read More: Risks & Benefits of Bitcoin for Women  

Ignore misleading or hyped news.

  • Refrain from deciding your next step based on news you read on social media, as Bitcoin is volatile and hot.

Create a balanced portfolio.

  • There are still multiple interpretations of Bitcoin, and Bitcoin traders are still trying to understand its complexity. That’s why a trader should focus on building a balanced portfolio rather than a heavy one. 
  • A balanced Bitcoin portfolio may include cryptocurrencies, Dogecoin, Bitcoin, Etherium, and various financial assets. Using this strategy, you can beat bitcoin volatility in the long run.
How to Analyze Bitcoin for Maximum

Factors that influence Bitcoin price

Once you understand factors that can influence the Bitcoin price, it will keep you one step ahead in the trading race.

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  • Limited supply

Bitcoin price depends on its demand and supply. Bitcoin has always had a limited number of coins, and currently, its supply is capped at 21 million, which is expected to be finished by 2140. 

A limited supply leads to the possibility of changes in bitcoin price, according to the supply and demand ratio. This ratio is going to simplify the process of How to analyze Bitcoin.

  • Market capitalisation

Bitcoin is perceived as the most sought-after investment, as it is the largest cryptocurrency in the world. In other words, bitcoin has the highest market capitalization.

  • Key events

Any key event or news directly related to Bitcoin’s security affects the overall market price of Bitcoin. For example, the ban on cryptocurrency in China has caused massive sell-offs in Bitcoin trading.

Also, if there is a significant development in the Bitcoin community, that also has a massive rally in BTC.

  • Smooth integration

Bitcoin cryptocurrency does not involve regulatory or centralized authority; that’s why there is a smooth transaction between two parties. That’s why Bitcoin’s reputation depends on its effortless integration into the modern payment system. If BTC is accepted as a legal payment method in various corporations and countries, it will directly affect its price.

Bitcoin is still growing as a new concept for various aspiring traders. Also, there is still a lot of scope for changes in taxation and regulation in respective countries. If you aspire to be a top player in Bitcoin trading, you should be used to unpredictability and constantly updating yourself with new trends. That’s how to analyze Bitcoin for maximum profit.

Read More: 5 Best Working Methods to Turn Bitcoin into Real Money in 2023  

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Palak Sharma
Palak Sharma
I am Palak, born and brought up in Himachal Pradesh. An introvert by nature who loves writing more than speaking. I do it often to express myself, to entrain myself, and to feel meaningful. While enjoying this world of words I ended up being part of a published anthology 'Blooming skies' with my poem 'On the day of devastation'. I love this concept of written words living on a paper till the end of time, they give me a sense eternity.

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