chart with a hand and a pencil

Technical analysis and charting: strategic use of information, or guess work? It's complicated.

By lucasc | Crypto Thoughts | 2 Dec 2020

Pretty much anyone with internet access can get some Bitcoin and hold it. Sometimes you can get free cryptocurrency in giveaways, or you can buy it on exchanges. When more people are interested in buying Bitcoin, they will be slowly offering more to compete with the others who are also trying to buy, and price will go up. Eventually, you will always reach points where some people sell off some / all of their holdings. The price will go down when there is more pressure for selling than there is for buying. 

As the price moves around, you can make charts of the change over time, and you can associate the data with other things. By looking at wider trends, you might be able to guess some things about the future. For example, if Bitcoin repeatedly goes up to around $19200 followed by quick drops back down to $18600, you could see that $19200 is the price where more people get hesitant to buy, and selling pressure builds up to push the price back down. 

While this information can be helpful, you have to be wary that cryptocurrency is evolving all the time, and new projects can get huge weight behind them quite quickly. Large projects can collapse just as easily as they are invalidated by better tech or hacked to devastating consequence. Sometimes, you'll get situations like PayPal integrating Bitcoin where opening the market to new people pushes the price up heavily. Recognizing these big news-driven movements can be easier than technical analysis. 

These two approaches are sometimes used together. You might say, "Well, this is the price it was when a bunch of people bought after that last update, so it's unlikely to drop below that point now that we have a market expecting a price higher than that." Looking at a chart can show you the price movements in relation to the news, but the technical analysis is coming during or after the movements take place. 

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Nodejs and Java Developer, learning blockchain.

Crypto Thoughts
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