With Bitcoin rallying to new heights in 2021, many expected to see it reach $100,000 by the end of the year. However, the market took an unforeseen downturn. The expectations of investors were shattered in the process. But this doesn’t mean that opportunities for trading have disappeared from the crypto market.
If you wanted to learn how to assess the market before making purchases on a cryptocurrency exchange online, look no further. In this article, we analyse five of the best tools you can use for both fundamental and technical analysis of the crypto markets. Let’s get started with a quick overview of the market in 2021-2022.
Crypto Market 2021-2022: Overview
In 2021, the cryptocurrency market entered one of its historical bullish cycles that came after the Bitcoin halving of May 2020. Bitcoin spearheaded this upwards trend, followed closely by altcoins. By May 2021, the original cryptocurrency had reached a new all-time high of $65,000. Quickly enough, the entire market cap of all cryptocurrencies combined was worth over $2.5 trillion.
Three main factors contributed to this bullish market:
- The institutional interest in Bitcoin and Ethereum. Institutional investors injected huge amounts of capital into crypto. This provided more stability to the markets and increased the trust in Bitcoin from the mainstream public.
- The NFT and meme coin craze. Droves of mainstream investors entered the markets through speculative trading instruments like NFTs. Meme coins like DOGE and SHIB underlined the insane potential of crypto’s profit opportunities.
- The rise of the DeFi scene. The decentralized finance market grew exponentially. Investors flocked to highly profitable lending and liquidity mining schemes. Decentralized exchanges entered the mainstream. DeFi ceased to be a niche market for highly knowledgeable traders.
The market didn’t manage to keep this upwards momentum. After one last rally in November 2021, cryptocurrencies have been in a steady decline. However, savvy analysts and traders have taken advantage of the substantial price fluctuations to make considerable profits. Below are some of the best tools that can help you analyze the markets, from both a fundamental and technical standpoint. Make sure you use these in tandem with the 4 best crypto screeners apps like Coingesko, Messari, Coinmarketcap, and Dappradar.
CryptoQuant is a powerful tool for analyzing on-chain data for both Bitcoin and Ethereum. The platform regroups crucial data when it comes to price movement. This includes exchange data such as the flow of funds from and to exchanges, holders’ profit ratios, and estimated leveraged ratios. Experienced analysts correlate these findings with direct price action to predict upcoming price movements.
Relative strength index (RSI) bands are price chart indicators. Technical analysts use them to assess whether an asset is overbought or oversold. In contrast to the classic RSI indicator, RSI bands are directly displayed on the price chart of the asset.
This allows analysts to more accurately predict the price level at which the assets are likely to reverse the trend. It’s a powerful indicator when used in combination with the moving average convergence/divergence (MACD), as they can allow you to place precise market entries and exits.
On Balance Volume (OBV)
Traders use on balance volume to predict price changes by observing volume changes in correlation with the price of an asset. In a nutshell, this indicator allows you to determine whether there’s increasing buying or selling pressure.
Traders can apply resistance and support levels to the OBV indicator. Bullish and bearish divergences on these levels allow them to predict trend reversals before they occur.
Dr. Doom Indicator
The Dr. Doom indicator for crypto is one of the most whimsical indicators out there. It stands for Nouriel Roubini’s (a.k.a. Dr. Doom’s) terrible predictions on Bitcoin. This notorious financial analyst has a track record of always being wrong about the market movements in crypto. As such, when he tweets about Bitcoin’s demise, traders consider that the bottom is in, which provides them with a buying signal.
The GBTC Premium (%)
Finally, we have the Grayscale Bitcoin Trust (GBTC) Premium indicator. Grayscale is one of the most noteworthy financial managers regarding cryptocurrencies. Because of their regulated status, this institution provides BTC trading instruments at a premium. This premium can be expressed in either positive (higher than the actual value) or negative (lower than the actual value) percentages.
Analysts believe that the GBTC premium is a good mid-term indicator for Bitcoin’s price. It can show increased or decreased mass interest in Bitcoin from institutions. If the percentage rises, this means that institutions are increasingly buying Bitcoin, signaling an upcoming bullish momentum.