Each cryptocurrency represents a different technological project. Although they are all treated as speculative financial assets, the reality is that behind them there is a technological proposal, a development team, a community, auditing processes, alliances with companies, etc.
Given this context of diversity, it is important to know what each cryptocurrency is about. But at the same time, it is essential to have access to reliable sources of information, such as subscribing to newsletters, getting involved in a community, following specialized youtubers, twitter accounts, reading Medium posts, among others.
However, beyond the data, the investor must be able to understand these processes and information, using fundamental or technical analysis.
Fundamental analysis is an investment technique used to predict the long-term future of an asset. To use this method, investors must take into account all the factors that will affect digital assets, from macro and microeconomic variables, demand and supply aspects, as well as market behaviors. The use of this method for short-term analysis is rarely profitable since these factors require time to show their effect on the market.
The elements that are key in this type of analysis are: market capitalization, the development team, development analysis, and active community supporting the project, among others.
Technical analysis, meanwhile, focuses on the short-term price movements of digital assets. This involves using price charts to identify trends and patterns from which the trader makes a short-term prediction of the price. Given the high volatility experienced in cryptocurrencies in recent years, technical analysis is becoming a favorite discipline for those hoping to profit in the crypto markets.
In this case, the key aspects to keep in mind are: setting a strategy, determining gain/loss percentages, investing only what you can lose, starting slow, and researching the different options.