For this Digital Wager Wire analysis into the world of decentralized currency, we investigate the top 5 indicators to consider when investing in crypto.
There are many indicators to use when deciding when, where, and how much you want to invest in crypto, so to narrow down to the top 5 could be hugely beneficial if you’re a cryptocurrency investor or considering dipping your toes into the digital age of investing for the first time.
When making your decisions in cryptocurrency, or even when looking to use crypto for betting, the more indicators combined in that decision-making process can only strengthen the case behind it.
Candlesticks
Personally, Candlesticks is the method that I have grown most accustomed to in my crypto journey. Trends over the long-term often have strong relevance and the candlesticks have the power to determine the immediate future of digital stock.
The candlestick reads top to bottom from the wick as follows:
- Highest price
- Price at opening
- Closing price
- Lowest price
Using a bar and a wick at the top, the information above is displayed clearly on the candle.
The peak of the price is shown via the top wick, while the tip of the bottom wick identifies the lowest price for that time interval. The body of the candlestick will be either red or green.
Green indicates the price closed at a higher value than it opened. Red is the opposite, informing traders the price closed below its opening bid.
The tip of the body of the candlestick top and bottom indicates opening and closing prices respectively.
In the long-term, understanding the patterns and trends of candlesticks can be hugely beneficial to your profits.
RSI – Relative Strength Index
The Relative Strength Indicator (RSI) is a very useful tool for cryptocurrency traders from beginners to experience traders for their analysis.
The RSI is the simple line graph which runs below the traditional line chart. An RSI line runs between values of 0 and 100. For understanding the RSI, 50 is known as the average which helps display overbought commodities that are shown by the higher values while the lower bought values example oversold conditions.
To support decision-making, RSI works in optimum fashion when combined with other indicators, such as Bollinger Bands, Fibonacci Retracements and MACD.
Fibonacci Retracements
Fibonacci Retracements monitor levels of value movement through the use of percentages to determine where support and resistance are likely to occur.
Levels are defined by percentages at 23.6%, 38.2%, 50%, 61.8%, and 78.6%, which are used to pinpoint how much a prior move in price has been retraced.
To example how it works:
- The trader picks two relevant points and applies the Fibonacci retracement.
- If the value of your commodity had been on the rise but then falls through the $2.36 threshold that alerts the 23.6% level which is a Fibonacci level.
- It is then assumed that on most occasions when the price hits a level, it will stall or reverse back although it is dangerous to assume that happens 100% of the time.
Smart Money Tools
Whatever form of trading or wagering, following the smart money is never a bad idea. There are several tools on the market to follow that smart money. Bitcoins (BTC) have one which highlights what is called “whale traders”. Whale traders are those unique wallet addresses known to have 1000 or more coins.
There are tools specific to altcoins and Ethereum (ETH).
It is worth arming yourself with the knowledge of platforms that assign smart money labels based on behavioural trends and capital outlay.
Smart Tool Platforms
- Amber Data
- Arkham Intelligence
- Covalent
- Dune Analytics
- Kaiko
- Token insight
MVRV – Market Value to Realised Value
Our final indicator is MVRV – Market Value to Realised Value.
MVRV is a ratio measurement of the current price that gives a realized price of an asset.
To find the result required, divide the current market value by realized value to calculate the final MVRV.
At Digital Wager Wire, we advise learning MVRV last of our five recommended indicators because it is a more specialized theoretical equation that requires a deeper knowledge of how the industry works, to understand fully.
Once you understand the workings of the indicator, MVRV brings valuable insight into investor behaviour and market forces for a nuanced high-level view of the cryptocurrency values and trends.
Digital Wager Wire Conclusion
For readers and followers, we identified the top 5 indicators to consider when investing in cryptocurrency. In order, Candlesticks tops the list of indicators, followed by RSI (Relative Strength Index), then Fibonacci Retracements, Smart Money Tools, and MVRV is best researched and understood when armed with the knowledge of the other four.
If investing in cryptocurrency, it is prudent to learn those five indicators and any others your research uncovers.
