Bitcoin being the first decentralized digital currency, has the largest market capitalization
among all other cryptocurrencies. The crypto traders use several tools to analyse the market
of cryptocurrency, one of which is Bitcoin Technical Analysis. With this approach, traders
are able to understand the market sentiment and trend in a much better way, allowing a
polished and practical predictions for trades.
The Bitcoin Technical Analysis counts in the coins’ history along with the trading volume and
price charts. On the other hand, the fundamental analysis is dedicated to establish a reading
of the coins’ value, or the worth of a security and its price movement.
The Negatives – We might consider the technical analysis to be valuable for bitcoin traders,
however, it is also important to know the negatives that the approach carries. Efficient market hypothesis comes in handy here since a lot of criticism for technical analysis is drawn because of this approach. Efficient market hypothesis in simple terms captures the idea that the market price of the commodity, Bitcoin in this case, captures all the available information of the commodity. Because of its simplistic approach, it undermines the importance of technical analysis to be performed to determine if a commodity/security is performing well or not. You will find both takers and haters of Efficient Market hypothesis making arguments in favour of their respective approaches and hence it is best left to the individual’s choice of approach to determine the value of Bitcoin in their possession.
We cannot deny the fact that technical analysis helps the traders to understand market sentiment and make some well-informed decisions based on their research. But at the same time, one better way of approaching the problem statement and containing the risk is to have best of both the worlds. In other words, bitcoin traders can combine the findings from both technical and fundamental approaches. For example, if majority of the technical indicators are pointing a trader towards buying the bitcoins, he can combine it with some fundamental analysis to see if Bitcoin is really undervalued at that point in time and if buying is really a better option.