Fundamental or technical analysis: which is best for cryptocurrency trading


The cryptocurrency industry is experiencing a period of unprecedented growth. Platforms have a robust algorithm that performs the research for bitcoin traders and makes trading easy. Also, it has helped many beginners to get started with bitcoin trading. These figures are only set to increase further over time, and more people are looking to invest in this space than ever before. 

Many investors are new to the trading industry and are still determining the best way to make money. Some have heard of technical analysis but need to understand how it can be helpful in trading cryptocurrencies fully. IF you are planning to invest in Bitcoin, you may also consider investing in a reliable trading platform like

In other words, traders who employ technical analysis attempt to profit from fluctuations in the market without having any insight into the underlying value of a security, commodity, or currency. So, it can predict future price movements purely via chart analysis. However, this assertion can be challenged by one key difference regarding technical analysis and its application: the lack of regulated exchanges allowing speculators to trade the underlying coins themselves.

Technical analysts use historical financial data to establish baselines and price trends to make educated forecasts about future price movements. However, the futures markets are immature with cryptocurrencies due to the lack of regulation surrounding these assets. The portion below will explore these two trading methods and the risks involved in each. It will then explore the associated risks and benefits of fundamental analysis (trading based on underlying value) versus technical analysis (trading based on charts and other indicators).

Fundamental Analysis: What is it?

Fundamental analysis is a passive trading approach that invests in cryptocurrencies where the focus is on the underlying value of that coin and how companies can use it to improve the life of its user and network. In contrast, technical analysis mainly focuses on factors external to the currency (e.g., charts, historical charts, etc.).

While not as widely used as technical analysis by cryptocurrency traders, fundamental analysis still has a place in this market. The main benefit of this strategy is that it allows traders to invest in coins with potential long-term growth without paying too much attention to short-term price fluctuations. In addition, fundamental analysis strongly focuses on developing cryptocurrency or blockchain. So it is because fundamental analysis seeks to invest in coins with a high probability of success and coins with developers interested in long-term value creation for its users.

In essence, fundamental analysis is based on macroeconomic factors determining whether the technology can meet a future price forecast. It requires investors to research, as they must look into various facets surrounding the coin. It includes aspects such as its development team, partnerships, and announcements (both upcoming and previous). In addition, they must also look at the roadmap of each coin and compare it to competing cryptocurrencies within the same industry. Market sentiments and the general sentiment in the media can also be considered by traders when assessing a coin’s value.

Benefits of fundamental analysis:

The most significant benefit of fundamental analysis is that it allows investors to invest in coins with a high probability of success. It is because developers are more likely to focus on a cryptocurrency’s long-term growth and success rather than short-term gains. In essence, fundamental analysis increases the likelihood of buying coins at a reasonable price before they experience a rapid price increase. These factors can also be used by companies to decide on which currencies to hold on to, as they are better indicators of future growth and value than historical prices.

Technical Analysis: What is it?

 Although this analysis is most commonly known in the forex market, it can also be applied by traders to cryptocurrencies. These are used to establish a base value for prices and determine when these prices are likely to change. For example, Bollinger bands will be more expensive when prices are less volatile and begin to narrow when prices are more volatile. 

Traders can also use technical analysis in conjunction with fundamental analysis. In this case, traders can use technical analysis to determine whether the factors surrounding a coin are currently at a point where it is likely to experience growth in the future (whereas fundamental analysis can help determine if that growth is sustainable). Technical analysts also rely on charts and historical data, which they use to make predictions about future price movements.

Risks of fundamental and technical analysis:

The principal risks of fundamental and technical analysis involve using historical prices to predict future price movements. Fundamental analysis has a chance of being too strict, as it can lead to coins being sold at a reasonable price before they are ready for growth. 

Similarly, technical analysis can also be too strict as it may sell a coin at a higher price than it should be sold for based on the data used to make the prediction. In addition, both types of analysis rely on past data and historical information for their predictions. It means that trends that verge on being “busted” (i.e., too high or low) may not be considered by traders when predicting future prices, leading to inaccurate forecasts and poor decision-making.


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