Executing successful trades in Bitcoin relies on conducting effective price analysis. But what are the best approaches to achieve this?
Bitcoin ($BTC) is the largest cryptocurrency by market capitalization and prominence. Its market capitalization exceeded $1 trillion during the 2021 bull run, and traders earned millions by reading charts accurately.
Learning to analyze Bitcoin's price effectively can be hugely profitable for short-term traders and long-term holders. Although no one can tell the future, certain analysis methods can help you improve your ability to gauge where the price of $BTC is heading.
This post will cover how to analyze live $BTC charts, introduce you to the most important chart formations, and how you can use Glassnode to identify crucial on-chain data.
Binance BTC Live-Chart
The Binance trading interface offers live Bitcoin charts with all the necessary indicators to execute a successful price analysis strategy. As $BTC is the leading crypto, you'll find that Binance offers dozens of different trading pairs, but for the sake of price analysis, it's best to stick to BTC/USD.
The charts allow you to monitor Bitcoin's price history, providing us with information about potential future movements. In addition, dozens of tools will help you gather historical and live data.
The popular instruments to conduct Bitcoin price analysis include:
Candlestick Chart: Out of the three different chart types, the candlestick chart is the best option for price analysis as it allows you to pinpoint price changes at specific moments.
Timeframe: Consider whether you are looking to identify short or long-term timeframes and adjust your chart accordingly to show minutes, hours, days, weeks, or months.
Indicators and Overlays: Add indicators and overlays such as RSI, MACD, and Bollinger Bands to your chart.
Drawing: Use the drawing tools to mark resistance levels, trendlines, and Fibonacci retracement levels.
Chart Formations
Once you've set up your chart, you'll be ready to start identifying chart formation. Focusing on the following three chart formations will help you conduct Bitcoin price analysis accurately.
Support and Resistance: Identify key levels where Bitcoin's price tends to bounce (support) or sell off (resistance). These two price points will allow you to estimate entry and exit points.
Trendlines: Drawing a trendline that connects higher lows and lower highs will give you a rough idea of Bitcoin's price trajectory.
Moving Averages: Use the moving average (MA) tool to identify key MAs such as the 20-day, 50-day, and 100-day. These are especially useful for finding long-term trends.
Technical analysis using chart formations is a solid way to conduct Bitcoin price analysis. Supplementing charts with on-chain data builds a complete picture of Bitcoin's market dynamics.
Glassnode's On-Chain Data
Glassnode is a blockchain analytics platform that provides on-chain data about Bitcoin and Ethereum. The on-chain data allows us to better understand Bitcoin's fundamental and technical market dynamics.
Consider using these on-chain data points to improve how you conduct Bitcoin price analysis with Glassnode:
Hash-Rate: The Bitcoin network's hash rate grows as more computer power is used to add blocks. A growing hash rate generally signals a positive market.
Volume: Growing transaction volumes normally signal that interest in trading Bitcoin is increasing, while a lower volume suggests the opposite.
Difficulty Adjustment: Bitcoin's mining difficulty usually increases as the competition grows between miners to earn rewards. This is generally a bullish indicator.
Exchange Flows: If the amount of Bitcoin flowing onto exchanges increases, it suggests selling pressure may rise, while Bitcoin leaving exchanges indicates more people plan to hold, thus potentially driving up the price.
Addresses: As the number of Bitcoin wallet addresses grows, so does adoption, which should result in bullish sentiment.
As always, with on-chain data, there's no guarantee that data points we regard as bullish will lead to positive price action. Nonetheless, combining Glassnode data with chart formation will allow you to understand Bitcoin's price trajectory comprehensively.
What are the indicators you use for Bitcoin price analysis? Comment below -