Cryptocurrency is a digital currency, invented to control the creation and transfer of money. Cryptography (or cryptology) is used to regulate and ensure the security and privacy of cryptocurrency. There are thousands of cryptocurrencies that have been minted since 2009, including Bitcoin, Ethereum, Ripple, Dash among others. Cryptocurrencies can be traded on trading platforms such as Bitcoin Motion, Binance, Poloniex, and others.
From the position of an average trader, it is difficult to choose the right platform. A big number of cryptocurrencies and high volatility makes it even more difficult to make your choice. That’s why we decided to help you by providing information on main indicators in crypto trading:
Cryptocurrency market capitalization
Market capitalization is the total cost of all existing coins. It is obtained by multiplying the number of coins by their price.
Market capitalization = Total amount of coins * Price per coin
It may seem that the market capitalization indicator doesn’t have its own characteristics, but in fact, it does. For example, if at one time you would have invested money in all existing bitcoins, your investment would have increased by more than 1000 times. This indicator shows how much your investment can grow due to price fluctuations.
Trading volume
The total trading volume within 24 hours is the liquidity indicator that reflects the number of coins exchanged between buyers and sellers on exchanges in a given period of time. Usually, this figure is expressed in the currency equivalent (for example, dollars or euros) and gives an idea of how many coins the market can absorb.
Market capitalization and trading volume are indicators that trade experts and traders use to assess the state of cryptocurrency markets. If the trading volume is high, it means that a large number of people buy and sell coins. This leads to prices increasing or decreasing, which is the main indicator for traders.
Price volatility
This indicator shows how much the price of the cryptocurrency has changed over time. It reflects changes in the cost of one coin during a day, week, month, or year. Cryptocurrencies are extremely volatile and prices can change rapidly because they aren’t influenced by any factors that could stabilize them.
In general, cryptocurrency market characteristics are difficult to predict. When the demand for a coin increases, it becomes more expensive, and when its cost falls, fewer people want to buy it. This creates a high level of volatility that often scares away newbies. Understanding how price fluctuations work is important in order not to lose money on exchanges and trading platforms.
Liquidity
This indicator is measured in the number of coins exchanged on exchanges per day. The bigger the number, the more liquid or active a cryptocurrency is and the easier it is to buy and sell it at any time. Crypto experts say that for big and serious players, liquidity is an important factor when choosing a platform to trade cryptocurrencies.
Relative strength index
The relative strength index (RSI) is a momentum indicator that shows the price change of an asset. It was first used by technical analysts in the 1970s to analyze stocks. The RSI compares the average value of assets overtime periods with their maximum values to determine overbought or oversold situations. This indicator can help traders identify overpriced or under-priced coins.
Conclusion
On the market, there are also other indicators that help traders predict price fluctuations in cryptocurrencies. They can be used to analyze the state of cryptocurrency markets and select the most promising coins for trading. Always feel free to check out more articles about crypto indicators.
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