Cryptocurrency Trading: Day-Trading and basics of technical analysis to speculate on digital currencies (Bitcoin, Ethereum, )
Many people would like to know the basics of cryptocurrency trading, so that they can speculate on the different exchange platforms that offer these digital assets (Bitcoin, Ethereum, Ripple, ).
But what are the basics to know to get started? Is the technical analyst commonly used in equity/currency markets also relevant?
And how to do, concretely, to “bet” on a crypto-currency?
You will find in this article all our tips, as well as a practical guide (at the end of the article) to be able to easily get any cryptocurrency.
Disclaimer: Like all articles on our site, this article does not constitute an investment recommendation. Crytpo-currencies are extremely risky assets, and we do not encourage you to invest your wealth in them. We cannot be held responsible for any capital loss incurred as a result of reading this guide.
Cryptocurrency trading: the opportunities offered by speculation on exchange platforms, in the short and/or long term
A real potential for cryptos, or a speculative bubble?
At the time of writing, the capitalization of crypto-currencies amounts to $ 143 billion.
It seems extremely high But it’s not that high!
An example: it’s less than 1/4 of the capitalization of Alphabet, Google’s parent company.
And this is much less than the peak experienced by dot com companies in the dot com bubble, reached in March 2000:
This graph also makes it possible to place the capitalization of crypto-currencies in a broader context (it takes into account a total weight of $ 100 billion for cryptos):
This leaves interesting growth prospects even if it is impossible to predict with certainty a future increase.
If many stock traders have recently converted to speculation on cryptocurrencies, it is also for a simple reason: their volatility is much greater than that of “classic” assets.
When CAC 40 stocks only change by a few points each day, it’s not uncommon to see digital currencies rise (or fall) by several dozen points in less than 24 hours. It is therefore possible for some to generate interesting income, even with a relatively low starting capital.
Day-trading or investing?
To make money with digital currencies, the goal is simple to summarize:
Buy low, sell high
To achieve this, economic agents can opt for two distinct solutions :
trading, which consists of generating positive cash flows in the short term (buy/sell over a few hours or days) investment, which consists in developing a portfolio of assets profitable in the long term
Note that it is quite possible to “mix” these two approaches: some investments will be dedicated to “day-trading”, while a part of your Bitcoins will be invested in a long-term perspective.
Feel free to refer to this table to learn more about the differences between these two approaches:
Whatever your approach, we advise you to install the Blockfolio application on your smartphone in order to follow the evolution of your portfolio in real time.
Fundamental analysis: What is the true long-term potential of a coin?
Fundamental analysis will consist of gathering information intended to know the true appreciation potential of a cryptocurrency. It is traditionally used to assess the value of a company through different aspects: accounting analysis, financial, competitive situation, human resources policy,
Know that you can find all the crypto-currencies on the CoinMarketCap website.
Do you want to buy one currency before the others, by investing in an ICO? The ICOAlert website presents all the ICOs in progress. You will usually be able to get them with an Ethereum wallet (like that of MyEtherWallet), after having funded your account with Ethers (you can do so click on this link).
The difficulty? Blockchain technologies are mostly “in the making”, and are not yet widely used. Many of them such as Neo, Stratis or Ethereum offer platforms that require the help of many developers to be able to make them attractive to consumers and / or companies.
The cryptocurrency investor will therefore have to try to anticipate the possible value of a crypto in the coming years. He will thus ask himself the following questions:
Does this crypto really bring anything compared to other crypto competitors?
Does it have the potential to “disrupt” existing markets ? Can it offer more attractive solutions (more transparent, faster, more “fair”, less expensive) than what exists today?
Does it face regulatory hurdles ? (we can think of the decline in the value of NEO at the beginning of September 2017, following the chinese government’s stated desire to ban ICOs to its nationals)
For this, two options are available to you.
The first is to read yourself the “whitepapers” offered by developers who have developed blockchain technology. They bring together everything you need to know about their value proposition: objective sought, algorithms used, distribution method, number of coins in circulation, possible absence of “premine”, In the best of all worlds, you would be able to read (and understand) the technology that supports all the major cryptocurrencies.
Except that it takes time (and it often requires computer knowledge related to blockchain technology, and sometimes knowledge of mathematics).
The alternative solution? You can often find information on the internet about the potential of certain cryptocurrencies. We suggest you visit the Reddit/BitcoinTalk forums dedicated to cryptocurrencies:
The Trading category on BitcoinTalk
The category “Speculation: Altcoins” on BitcoinTalk
Do not hesitate to also visit , a platform on which you can find “reviews” of digital assets.
Technical analysis of the price of crypto-currencies: how are the markets likely to evolve, in the short (day-trading) or in the long term?
Technical analysis: applicable to cryptos?
As a reminder, technical analysis will allow us to “read” the graphical representations of the evolution of the price of an asset, in order to draw up trends and include mathematical indicators.
Good news: most traders consider that the fundamentals of technical analysis used for “classic” trading are the same when it comes to speculating on cryptocurrencies.
But beware: this analysis must imperatively be used in addition to a fundamental analysis. Indeed, the value of an asset that has no added value will sooner or later decrease, regardless of the “patterns” you can identify.
It is also recommended to rely on technical analysis primarily for technologies with a larger capitalization (above $ 20 million). It is indeed more complex to predict significant trend changes for smaller markets, where volatility can be very high.
Note, however, that technical analysis is never an exact science : it is quite possible that an event predicted by technical analysis will not take place.
And it is recommended to be cautious, never basing yourself on a single indicator to predict an up/downtrend. It is generally advisable to have at least 3 “indices” from different concordant indicators, in order to be able to make a decision.
