market banner newscrypto

Everything you need to know about crypto price index

Investing in cryptocurrencies requires that you have a basic understanding of how the market works. For beginners, this idea may be overwhelming, but having a good grasp of digital assets’ movement in the market can help you improve your investments and grow them effectively. Fortunately, there are easy ways to keep track of the crypto market without getting lost into a labyrinth of data.

One way to keep an eye on cryptocurrencies is to look at their price index. So, if you want to learn more about cryptocurrencies and how to read their behaviour in the market, here a few things you should know:

All things crypto: Crypto price index

A crypto price index is the indicator of digital assets that can be used by investors to track how digital assets function in the market. Usually, there are different metrics used to measure crypto price index. Here are some of them that you need to check out:

  • Index weighted by price

This method adds up all the market price of all the shares within the index. Once that amount has been calculated, it will then be divided by the number of incoming shares.

  • Index weighted by capitalization

The index weighted by capitalization computes the sum of the market cap of the assets in the list. After all the shares are added, it will be divided by a divisor. The divisor used for this equation is the previous price of the assets.

  • Equal-weighted index

This type of index is calculated by getting the average of all the assets’ percentage changes in the stock market, even if the market cap value changes.

Different types of cryptocurrency analysis

Cryptocurrencies can be interpreted through different methods of analysis. These methods vary in terms of metrics and presentation. See them below to know how to properly analyse the market:

Technical analysis

This type of analysis aims to monitor the trends in the market through the use of historical data. It includes price movements, trading volume, and utility.

Experts who use this method follow an idea that cryptocurrencies’ value is determined by the trends surrounding it. For example, if Bitcoin is bullish, a technical analyst would refer to its previous behaviour in the market.

Fundamental analysis

A fundamental approach in analysing cryptocurrencies uses different sets of metrics for interpreting data. This type of method refers to the economic factors surrounding a certain asset.

For example, if a cryptocurrency is well-received and boasts stellar performance, fundamental analysts would look at the blockchain or the progress of the country using that certain asset

Sentimental analysis

A sentimental analysis sees the users as the main indicator of a cryptocurrency’s growth. For this method, the participation of individuals such as influencers, traders, whale investors, and investors can greatly impact how a certain coin will be received by the public.

Most sentimental analysts believe that the fate of digital assets can be weighed through the expectations and perceptions of users.

Common types of graphs used to analyse cryptocurrency trends

Line price chart

A line price chart is one of the most common ways to project cryptocurrency growth. Usually, it gives people an idea of how assets’ price changes over a certain period of time. The line present in the chart depicts the movement of the currency.

There are two types of line price charts: the linear and algorithmic chart. Investors who want to see a more straightforward analysis opt for the linear chart. Meanwhile, people who want more information on trend changes should refer to algorithmic charts.

Candlestick chart

The candlestick chart is one of the most functional visuals to project the growth of cryptocurrencies. Compared to line price charts, this type of chart gives users the movement of a certain cryptocurrency in a specific period of time. The candlestick is the most useful because it doesn’t only show price changes, but also the highest and lowest assets in the list.

A candlestick chart is usually depicted in colours green and red. When the chart is green, it means that the asset is going for a bullish run. On the other hand if it’s red, it means the coin is up for a bearish direction.

Furthermore, candlestick charts have several coloured lines called ‘moving average indicators’ that represent the average price of a cryptocurrency based on its status for the past 7, 25, and 99 days.

Market depth chart

The market depth chart depicts the supply and demand in the crypto market. For people who are into day trading, this type of chart is the perfect reference because it projects the real-time movement of digital currencies.

There are two sides of the market depth chart. The red side depicts the number of cryptos that have sell orders. On the other hand, the green side shows the digital currencies that have buy orders. In the middle of the chart, you will see the current price of the assets.

Market trends in cryptocurrencies you should know about

Accumulation phase

When a cryptocurrency is in its accumulation phase, it means that it’s entered the period when a small number of investors are buying and selling their assets. During this stage, there isn’t too much change in the price because only a small community is interested in trading.

Absorption phase

The absorption phase of a cryptocurrency means that it has reached a stage where its gaining credence in the market. Usually, this stage is set by the experts in trading.

Distribution phase

The distribution phase in crypto is the time where sellers dominate the market. Usually, this stage is where sharp sell-offs happen, followed by a sudden increase in value because users think that the crypto will continue to have a bullish stage.

Leave a Comment

Please enter CoinGecko Free Api Key to get this plugin works.