In less than 2 decades cryptocurrencies have gained mainstream relevance as a valid class of tradable assets. There have been debates regarding its nature- whether it’s a security or a commodity. However, its significance is too big to ignore, especially with a global market capitalization currently exceeding $1 trillion. During the height of the crypto craze at year-end 2021, the market cap had scaled past $3 trillion. With over 500 crypto exchanges and more than 300 million active investors, leveraging crypto trading services through crypto broker platforms is a lucrative earning opportunity. A majority of global financial institutions already have dedicated teams and fund allocations directed toward digital assets. This article will shed light on the top tricks and techniques used by traders in crypto broker platforms to forecast future crypto prices.
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What is a Crypto Broker Platform?
Crypto broker platforms are the preferred choice for seasoned traders for multiple additional features, including liquidity and higher security. Traders deposit collateral and utilize leveraging opportunities as offered by the broker. The usage of brokerage services is particularly popular among mediums and short-term players, who, unlike HODLers, do not accumulate crypto tokens in hardware wallets and wait for prices to rise.
The crypto broker acts as an intermediary between buyers and sellers willing to trade in digital assets, and earn commission by expediting the process in a manner similar to crypto brokers. The margins remain high compared to conventional stock markets, mainly due to the volatile nature of crypto markets. Additional features such as crypto derivatives, CFDs, and crypto futures are often offered by crypto brokers, depending on their associated exchange.
Established financial firms as well as entrepreneurs worldwide can utilize these platforms and add crypto trading to their list of services. Some white-label crypto broker platforms enable enlisted participants to offer these trading services across 400 global crypto marketplaces and more than 20 crypto-fiat trading pairs.
Crypto Broker: Insights Hidden in Plain Sight
White-label crypto broker platforms present multiple benefits, including
- Legal Compliance
The white-label platforms adhere strictly to global crypto regulations, and will also include the upcoming frameworks.
- KYC/AML Adherence
Crypto broker platforms acknowledge the importance of complying with global crypto regulations, and utilize blockchain for safe, distributed, and permissioned storage of transaction records.
- 24×7 Maintenance
Firms offering crypto brokerage service architecture offer round-the-clock support and maintenance in multiple languages.
- Liquidity
Liquidity is one of the key concerns in the crypto community. This is resolved by crypto brokers by watching access to numerous crypto exchanges all across the world.
In addition to the benefits mentioned above, crypto brokers can also offer customized brokerage services such as investment tips and recommendations based on their market research and experience in forecasting. It is necessary to note that there are two major challenges against accurate predictions in crypto as an asset class- its novelty and its volatility.
Price Forecasting Techniques Used by Experts In Crypto Broker Platforms
Cryptocurrencies are fairly new as an asset class. As such, there is little data for analysts to determine trends with high accuracy. However, it does not mean the tools and techniques used by conventional traders for ascertaining market movements will be completely invalid. It might not be highly precise in the medium or long term, but that does not mean they fail to paint a clear picture. Experts recommend combining multiple analysis methods for more accurate forecasting. The following analytical techniques are useful in crypto markets:
1. Fundamental Analysis
Seasoned crypto traders use fundamental analysis to forecast market prices by examining the financial health and performance of a cryptocurrency, as well as broader macroeconomic factors that may impact its value. Regulations and trade crackdowns, for example, have a negative impact on crypto pricing.
- Financial Performance and Macroeconomic Factors
An in-depth fundamental analysis will include checking the token’s financial stability and profit generation along with revenues, expenses, profits, and growth. Analysts may also check the balance sheet, cash flow statement, income statement, and other parameters.
In addition, it is also vital to keep macroeconomic factors like inflation, interest rates, and the nation’s economic growth in active consideration. For example, a rising interest rate environment may lead to a decrease in demand for riskier assets like cryptocurrencies, while an improving economy may increase demand for these assets.
- Adoption and Collaborations
Regarding adoption, it is essential to focus on usage rate, number of transactions and active users, real-world impact, and future potential. Networking benefits, including partnerships and integrations, also point towards the token’s viability, which in turn reflects its future potential.
It is crucial to have a holistic picture and examine the state of the cryptocurrency market and its underlying technology, economic and political factors, adoption rate, and network effects to gauge future performance.
2. Technical Analysis
It deals with examining past price trends, chart patterns, and indicator signals to identify possible future price movements. This can include chart patterns, such as head and shoulders or support and resistance levels, as well as the use of technical indicators, such as moving averages, relative strength index (RSI), and Bollinger Bands.
- Chart Patterns and Moving Averages
Crypto broker platforms offer detailed graphic views of fluctuating crypto prices in real-time. These are used by traders to identify specific chart patterns(head and shoulders or trend lines), detect potential trends, and make predictions about future market behavior. A head and shoulders pattern can indicate a potential reversal in the market, while a trend line can suggest a continuation of the current trend.
A simple moving average(SMA), calculated by taking the mean average price from a pre-defined time frame of previous prices, is used to smooth price fluctuations and identify trends. Using SMAs with separate time sets is common among crypto traders seeking a better understanding of market trends.
- Relative Strength Index(RSI) and Bollinger Bands
RSI is a popular indicator that highlights the strength or momentum of a price change. With a scale of 0 to 100, it determines overbought(>70) and oversold(<30) conditions, which help traders in determining trend reversals and good entry/exit points.
Bollinger Bands reflect volatility, comprising a short moving average and 2 standard deviation lines- one above and one below the SMA. The bands adjust to market volatility, expanding when the market is volatile and contracting when it is less so.
For experienced professionals, technical analysis is very effective in forecasting market prices by examining past price and volume data to identify patterns and trends that may indicate future market behavior.
3. Sentiment Analysis
Traders in crypto broker platforms use sentiment analysis to forecast crypto prices by examining the public opinion and sentiment surrounding a cryptocurrency to gauge its potential for future growth. The ways to judge public sentiment include social media analysis, news and media analysis, community metrics, online search volume, and more.
- Social Media and News Media Analysis
Crypto traders analyze social media platforms, such as Twitter, Reddit, and Telegram, to get a sense of the public opinion and sentiment surrounding a cryptocurrency. Patterns can be identified in the tone and content of discussions, such as an increased frequency of positive or negative comments, to gauge its potential for future growth.
Trading professionals also examine news and media outlets, such as news websites, blogs, and forums, to get a sense of the public opinion and sentiment surrounding a cryptocurrency. They look for patterns in the tone and content of news articles, such as an increased frequency of positive or negative coverage, to gauge its potential for future growth.
- Community Metrics and Online Search Volume
Crypto experts may examine community metrics, such as the number of subscribers and participants in online forums and social media groups, to get a sense of the level of engagement and interest in a cryptocurrency. An increase in community metrics may indicate a growing level of interest and positive sentiment.
Online search volume, such as Google Trends, indicates the level of interest and activity surrounding a cryptocurrency. An increase in search volume may indicate a growing level of interest and positive sentiment, while a decline may indicate a decrease in interest and negative sentiment.
Monitoring news and events related to cryptocurrency, including government regulations, partnerships, and major announcements can have a significant impact on the market. Similar to stock market investors, crypto traders may also use historical analysis to examine the impact of past news and events on the demand for a cryptocurrency. However, the challenge is in the novelty of crypto markets as an asset class.
4. Machine Learning (ML) Analysis
Crypto analysts well-versed in data science deploy machine learning (ML) analysis to forecast crypto prices by using algorithms and models to analyze large amounts of data to identify patterns and make predictions about future market behavior.
- Data Analysis and Model Training
Analysts first collect and clean large amounts of historical data on crypto prices, such as trading volume, order book data, and news articles, to train ML models. They may also collect and clean additional data, such as economic indicators, to incorporate into their analysis.
Traders then train ML models, such as decision trees, random forests, and neural networks, to analyze the data and identify patterns that can be used to make predictions about future market behavior. They use techniques such as cross-validation and backtesting to ensure that the models are accurate and effective.
- Predictive Modeling and Refining Models
Once the ML models are trained, traders use them to make predictions about future crypto prices based on the patterns identified in the data. They may also use these models to make predictions about other market variables, such as trading volume and volatility.
Traders continuously refine their ML models by updating the data used for training and testing, as well as the algorithms and models themselves, to improve their accuracy and effectiveness.
5. Correlation Analysis
Traders use correlation analysis to forecast crypto prices by examining the relationship between the price of one cryptocurrency and the price of another cryptocurrency or other assets such as stocks, commodities, or fiat currencies.
- Cross-asset and Cross-cryptocurrency Correlation analysis
Traders using white-label crypto broker platforms examine the correlation between the price of one cryptocurrency and the price of other assets to get a sense of how changes in the price of one asset may impact the price of another.
For example, they may look for a positive correlation between the price of Bitcoin and the stock market to get a sense of how changes in the stock market may impact the demand for Bitcoin.
They may also examine the correlation between the price of one cryptocurrency and the price of another cryptocurrency to get a sense of how changes in one cryptocurrency may impact demand for another. For example, they may look for a positive correlation between the price of Ethereum and the price of Bitcoin to get a sense of how changes in the price of Bitcoin may impact demand for Ethereum.
- Historical and Real-time Correlation Analysis
Crypto analysts may use historical correlation analysis to examine the relationship between the price of one cryptocurrency and the price of another asset or cryptocurrency over time. They look for patterns in the correlation to make predictions about future market behavior.
Other crypto experts may also use real-time correlation analysis to examine the relationship between the price of one cryptocurrency and the price of another asset or cryptocurrency in real-time. This allows them to quickly identify changes in the relationship and make predictions about future market behavior.
Correlation analysis is valuable in studying the relationship between cryptocurrencies and other markets, such as traditional financial markets, to identify potential correlations and use them to make price predictions.
Wrapping Up
It’s worth noting that no single tool or technique can provide a foolproof prediction of crypto market prices and that multiple factors should be considered and weighed against each other. Additionally, the crypto market is highly volatile and susceptible to sudden, dramatic price movements, making forecasting a difficult and uncertain task. However, these tricks can be utilized to reduce the chances of an error in judgment.
