Crypto Market Analysis - 5 minutes read
Cryptocurrency has been around for a while now and there are multiple papers and articles on the basics of Cryptocurrency. Not only has Cryptocurrency flourished but has opened up as a new and trusted opportunity for investors. The crypto market is still young but mature enough to pour in an adequate amount of data for analysis and prediction of trends. Though it is considered the most volatile market and a huge gamble as an investment, it has now become predictable to a certain point and the Bitcoin futures are proof of this. Many concepts of the stock market have now been applied to the crypto market with some tweaks and changes. This gives us another proof that many people are adopting the Cryptocurrency market every day, and currently, more than 500 million investors are present in it. Though the total market cap of the crypto market is $286.14 Billion which is roughly 1/65th of the stock market at the time of writing, the market potential is very high considering the success despite its age and the presence of already established financial markets. The reason behind this is nothing else but the fact that people have started believing in the technology and the products backing crypto. This also means that the crypto technology has proven itself so much that the companies have agreed to put their assets in the form of crypto coins or tokens. The concept of Cryptocurrency became successful with the success of Bitcoin. Bitcoin, which once used to be the only Cryptocurrency, now contributes only 37.6% to the total Cryptocurrency market. The reason is the emergence of new Cryptocurrencies and the success of projects backing them. This does not indicate that Bitcoin failed the market capitalization of Bitcoin has increased, rather what this indicates is that the crypto market has expanded as a whole.
These facts are enough to prove the success of Cryptocurrencies and their market. In reality, investment in the Crypto market is considered safe now, to the extent that some invest for their retirement plan. Therefore what we need next are the tools for analysis of the crypto market. Many such tools enable you to analyze this market like the stock market providing similar metrics, including coin market cap, coin stalker, crypto and investing. Even though these metrics are simple, they do provide crucial information about the crypto under consideration. For example, a high market cap indicates a substantial project, a high 24-hour volume indicates high demand and circulating supply indicates the total amount of coins of that crypto in circulation. Another important metric is the volatility of a crypto. Volatility is how much the price of a crypto fluctuates. The crypto market is considered highly volatile, cashing out at a moment might bring in a lot of profit or make you pull your hair. Thus what we look for is a crypto that is stable enough to give us time to make a calculated decision. Currencies such as Bitcoin, Ethereum and Ethereum-classic (not precisely) are considered stable. With being stable, they need to be strong enough, so that they do not become invalid or simply stop existing in the market. These features make crypto reliable, and the most reliable Cryptocurrencies are used as a form of liquidity.
As far as the crypto market is concerned, volatility comes hand in hand, but so does its most important property i.e. Decentralization. The crypto market is decentralized, what this means is that the price fall in one crypto does not necessarily mean a downtrend of any other crypto. Thus giving us an opportunity in the form of mutual funds. It's a concept of managing a portfolio of the cryptocurrencies that you invest in. The idea is to spread your investments to multiple Cryptocurrencies to reduce the risk involved if any crypto starts on a bear run.
Similar to this concept is the concept of Indices in the crypto market. Indices provide a standard point of reference for the market as a whole. The idea is to choose the top currencies in the market and distribute the investment among them. These chosen cryptocurrencies change if the index is dynamic and only considers the top currencies. For example, if a currency 'X' drops to the 11th position in the crypto market, the index considering the top 10 currencies would now not consider currency 'X', but rather start considering currency 'Y' which has taken its place. Some providers such as cci30 and crypto20 have tokenized these Crypto indices. While this might look like a good idea to some, others oppose it because there are some pre-requisites to investing in these tokens such as a minimum amount of investment is needed. Others such as Cryptoz provide the methodology and an index value, along with the currency constituents so that an investor is free to invest the amount he/she wants to and choose not to invest in a crypto otherwise included in an index. Thus, indices give you a choice to smooth out the volatility further and reduce the risk involved.
The crypto market might look risky at first look and many might still be sceptical of its authenticity, But the maturity that this market has attained within the short period of its existence is amazing and proof enough for its authenticity. The biggest concern that investors have is volatility, for which there has been a solution in the form of indices.