At the dawn of the crypto market, when specialists were trying to create a framework for cryptocurrencies and categorizing them as an asset class. As part of the categorization, specialists in economics had to understand and analyze the behavior of crypto assets as a type of market class and approximate it to existing assets and their established fundamental analysis theories.

Analyzing Cryptocurrencies – The Class

Analyzing cryptocurrencies is just as an art as it is process of mathematical sifting, since they are unlike any other asset or commodity that has ever been developed or market fielded. A shining example successful categorization of cryptocurrencies as an asset is the case of Bitcoin itself, which has long been considered an asset class in its own right. The king of cryptocurrencies has been outperforming every other asset in history by its price dynamics. And yet, it has shown to demonstrate behavior similar to the behavior of traditional financial assets, such as currencies on Forex exchanges. However, historical data and in-depth analysis of formulated historical price charts of Bitcoin has proven that the cryptocurrency is more of a commodity than a currency when it comes to its behavior analysis.

Being by virtue highly susceptible to external triggers, like announcements of adoption by major companies, or large inflows of investment from major funds, Bitcoin can be correlated to oil, which is just as susceptible to geopolitical events and reacts violently in price. Bitcoin’s price hikes outstrip those of oil greatly, but the digital currency is as much perceptive of the real, base economic principles that set it aside as a commodity – in essence – an abiding element of classical economics.

Bitcoin is a carrier of intrinsic value, as most coins and stablecoins on the market, and that means that it beats intrinsic value and abides by the laws of supply and demand, since it, as an asset with limited emission, is also scarce.

Cryptocurrency Fundamental Analysis

Intrinsic value can be established by defining the fundamental value of an asset The effort takes into account the various factors affecting the overall valuation of an asset to determine its valuation as high or low.

Cryptocurrencies are also subject to fundamental analysis. But unlike traditional assets that have their value determined through such indicators as price per share or earnings per share, cryptocurrencies have their own set of metrics. Technical analysis has also been adapted to cryptocurrencies by traders, who have established that most digital assets trace the same behavior on market charts as traditional tradable assets, like fiat currencies. This makes it possible to apply such analysis techniques as MACD, Moving Averages, Candlesticks and other indicators to cryptocurrencies.

Cryptocurrency Fundamental Analysis Metrics

The main metrics used for conducting fundamental analysis of digital assets can be divided into on-chain and off-chain sets.

On-chain factors for cryptocurrencies include important numerical factors, essentially, transparent and available for viewing by anyone online. These include such figures as the total number of conducted transactions for a certain cryptocurrency within a timeframe, the total value in all transactions for some period, the total number of users holding the cryptocurrency, the current hash rates and amounts of the asset staked, and, most importantly – the fees paid for said asset.

Commission fees are extremely indicative as clear evidence of demand for some specific cryptocurrency. Supply and demand are the factors determining the price for assets, be it Bitcoin of traditional assets.

Off-chain metrics for a cryptocurrency are reminiscent of the stimulants that can affect the price of oil. For digital assets, off-chain factors are the likes of the wholesomeness and performance of the issuing project, the total inflows of investments, positive news backgrounds, major update or partnership announcements, adoption rates, and others.

The Financial Metrics

The financial indicators of a cryptocurrency are just as critical, which include total market capitalization, its liquidity and trading volumes, and the total available supplies. The combination of these metrics illustrates the fundamental value that a cryptocurrency bears and allows investors to assess whether their object of analysis is performing well, or poorly.

Conclusion

Metrics, fundamental or technical analysis separately is not capable of acting as reliable proof of a digital asset’s performance, just as with traditional assets. The combination of financial performance over time with the internal and external factors create an overall image of a digital asset and give investors clear guidelines on whether an asset is worth investing in – in conjunction with their own intuition and experience.

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Last week we predicted that Bitcoin would test the $60k strong resistance zone, and if it failed to break/hold above this – it would retrace and test support levels closer to $50k. This seems to be exactly what played out and what continues to play out on the charts this week! Let’s take a look and see how our predictions/analysis worked, and see if we can continue to decipher the trends. 

BTC/USD 4H Chart from Tradingview

As you can see, Bitcoin did in fact break the previous high of $58k and briefly traded as high as $62k before failing to hold the $62k level upon the first retest. Because of this, Bitcoin has been trending down, currently trading at $55k. Our prediction that holding above $60k was unlikely proved out to be true – largely since the market is heavily overbought and a bearish signal on the moving averages. 

(BTC/USD 4H Chart with Moving Averages from LAST WEEK) 

Price Analysis

Last week we saw the moving averages in the chart above and saw that the 100MA was flat/slightly down and was coming up on a bearish cross with the 200MA. 

BTC/USD 4H Chart, UPDATED

If we look at the updated chart for this week, we see that the 100MA line (light blue) changed direction and did not complete the bearish cross with the 200MA line (yellow). While the bearish situation did not fully complete, it remains close if this downtrend continues. The 200MA line has been strong support during this uptrend (see around Mar 1) and will most likely continue to be around the $50-51k mark. 

BTC/USD Daily Chart from Trading View

Looking at the long-term daily candle chart, it’s clear that despite these pullbacks in price we are still in a bullish situation. The closest support according to moving averages is around $52k (20MA). 

BTC/USD 4H Chart with RSI

Lastly we will use the RSI on the 4H chart to determine if we are overbought/oversold for the week. Last week it was clear that we were overbought and due for a correction – which happened. This week we can see that the correction has definitely begun, but we are still in the purple zone – which means we have a little ways to go before becoming oversold.

Investor Sentiment

We are still in the “greed” zone – which has climbed up a bit from 68 last week to 71 today. This is probably due to Bitcoin minting its new ATH, but overall is a signal that further price reductions are likely for now. 

Fundamental Analysis

Total Hash Rate, taken from Blockchain.com

The Total hash rate continues to be strong, declining slightly from last week but still up about 50% from where it was this time last year. This indicates that the mining cost (inherent value) of Bitcoin remains strong. 

It was reported last week that Chinese app Meitu bought $40 million worth of Bitcoin and Ethereum, indicating that institutional investment into cryptocurrencies continues to rise. This is a long term bullish case. 

Conclusion

It appears we are in a short term down trend, and that we will test the $50-52k support zone. This should be a strong support, as it is a combination of moving average, RSI, and psychological support zones. If this support somehow fails, we will likely continue trending further down. Otherwise if it holds, expect a retest of $60k. 

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It’s been a few weeks since our last Bitcoin Analysis piece, but we are back and ready to dive back in! Bitcoin has been up to a lot since our last article, which was published in early December when Bitcoin was still trading under $20k. We had predicted in the past that a price target for Bitcoin this cycle was around the $50k mark – and we were correct! Bitcoin has fluctuated around this price point, and seems poised to test new highs. Let’s take a look at the charts, as well as conduct some fundamental analysis and see if we can predict future trends! 

Price Analysis

BTC/USD 4H Chart taken from Tradingview

Bitcoin has ranged in the 40-50k zone since it crossed this threshold in early February. It now appears to be approaching the $58k mark, which was our previous high. If the price breaks and holds above the $58k resistance, we could see Bitcoin test $60k. If Bitcoin fails to break $58k, it is likely we return to the $50k price point to test support. 

Looking at the moving averages, we can see that the yellow 200MA line acted as strong support after the initial fall from $58k. This 200MA has continued to rise, and is now positioned between $48-50k. This is our support zone. 

A looming bearish sign is the flatlining 100MA, which could soon push a bearish cross beneath the 200MA. Remember, whenever 20MA>100MA>200MA, we are in a bull cycle (for a given timeframe). Likewise, whenever 20MA<100MA<200MA, we are in a bear cycle. If Bitcoin fails to break above 58k and retraces, we could see a death cross scenario. 

BTC/USD 1D Chart from TradingView, Moving Averages Shown

Looking at the much larger 1D chart, we can see that the market has been highly bullish for a long time – and we are way above our support levels. The 100MA is currently sitting at $35k and the 200MA at $23k. If we move into a bear cycle, look to these areas as key support levels. 

BTC/USD 4H Chart, RSI shown

The Relative Strength Index (RSI) is one that we often use to determine if the market is overbought or oversold in a given timeframe. Whenever the index trades above the purple zone, we are overbought, and likewise oversold when trading under the purple zone. As it stands, we are overbought – meaning we are likely due for a correction soon. This makes it look unlikely that Bitcoin will break the $58-60k zone resistance, but stranger things have happened. 

Investor Sentiment 

Fear/Greed Index, taken from Alternative.me

The Fear Greed index is one that we often use to predict large market movements. We have been in the “extreme greed” territory for the past several months, but we have now entered the “greed” territory. Generally speaking, “extreme greed” means that we will correct down. However, “greed” is not a strong indicator by itself and could easily go back to “extreme greed” zone. 

Fundamental Analysis

Taken from Blockchain.com

Bitcoin’s hash rate continues to be strong – climbing back upward toward its yearly high of 165m TH/s, which was achieved on Feb 8. A high hash rate means that the network’s electricity consumption is high – keeping the mining cost high (and subsequently, Bitcoin’s inherent value). 

Fundamentally, Bitcoin continues to be very strong – with institutional investment continuing on a daily basis. Today alone, Israeli Pension Giant put $100M into Grayscale, and the newly passed stimulus in the United States has pushed Bitcoin closer to its all time high. This comes on the heels of big companies such as Tesla, who have diversified a portion of their company holdings into Bitcoin. 

Conclusion

Bitcoin’s latest bull run has brought us to record highs, and it may not be over yet. It’s looking like it will retest its all time high before making a decision point. The indicators seem to predict that it will not break the $60k level before retracing, but anything can happen. The market remains greedy, and is becoming heavily overbought. Look at $60k as a strong resistance, and $50k as support. 

This is not investment advice. Article is intended for education and entertainment only. Do your own research.

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