Price predictions have always been a stumbling block of cryptocurrency analysis. There are thousands of price forecast articles, even on our blog. Everybody reads, yet nobody truly believes it.
We’ve decided to explain what price prediction is actually about, and learn the basics of analysis. Spoiler: your high expectations may disappoint you.
Is It Even Possible to Predict Any Price?
Well, if we consider tarot cards or fortune-telling, the answer is definitely no. The first step a newbie takes is entering a ‘price-predictions-dot-com’-like website and getting the exact numbers. And then his investment dreams become shattered. Why?
The thing is that such websites use machine learning algorithms, which means that behind the numbers are formulas. Since the crypto market is highly volatile, these numbers can change every day (if not every hour). Machine learning has been successful in the case of stock price forecasts.
Cryptocurrency price depends on several things:
- Market mood and events behind it;
- Internal competition;
- Economic and security issues, and more.
The price is not the issue we need to predict. However, we can analyze the charts to understand the trend.
A Bit of Theory
In general, there are three types of price analysis: technical, fundamental, and sentimental.
- Technical analysis is based on the historical activity of the asset. Those who prefer this method are convinced that price patterns repeat over and over again. It can be compared to meteorologist and weather forecast – might be both right or wrong.
- Fundamental analysis is based on the events and overall company/team behind the project behavior. Those who adopt fundamental analysis believe that every sudden price increase is a correction phase.
- Sentimental analysis is based on the key players’ opinions. According to this method, journalists, bloggers, and influencers can shift the direction of an asset’s price.
So, in order to get the most exact prediction, we need to combine all these methods. However, it won’t work for short trading (since actually nothing works for short trading).
3 Tips to Follow
If you are new to crypto and don’t want to dive into the moving average things, here are 3 simple things to consider.
- DYOR (or Do Your Own Research)
An obvious one, right? However, some people neglect this point. Why is it so crucial? You won’t believe it, but your brain and critical reasoning can do magic. If you dive deep into the project you want to invest in, it might help you not to lose money in the future (due to scams or immature documentation).
- Follow the trendsetters’ social networks
We all remember the events that happened after Elon Musk’s tweets (if you don’t, check it out). The main message is to follow all the financial experts or influencers who can make the market move.
Who else to follow on Twitter?
3. Read the news a lot. We mean A LOT
If we speak in terms of fundamental analysis, there is a high chance that an event can cause a price drop or boost. There can be any kind of restrictions or acceptance all over the world. If you are updated on current crypto news, you can easily predict future price moves.
So How Should We Predict the Price?
The thing is, we don’t need to predict anything. Since the crypto market’s nature is extremely volatile, you actually cannot get the exact price of Bitcoin in two months, three days, and five hours. However, if you understand the overall market situation, you will be ready for any market changes. Moreover, you will be able to guess the future price.