5 ways to analyse crypto market trends

Cryptocurrencies have been around for over ten years now and it has rocketed into the mainstream eye in the last six years. The coronavirus pandemic and the ubiquitous stimulus checks provided young enthusiasts with two things in abundance, time and free money. Naturally this seeped into the growing market mania of 2020, a period far away from today.

Now with FED’s hawkish stances reinstating the fact that what goes up, can go down, knowing where the market is heading is a useful insight for investors. These are a few signals we can look for to understand how the market as a whole is moving.

1. Market Capitalisation: Market capitalisation, commonly called market cap, is equal to the token price multiplied by the total number of tokens in circulation. An increase in market capitalisation shows that the market is excited about the ecosystem and there is a net capital inflow into the crypto industry. The aggregate market cap of all cryptocurrencies crossed $3 trillion at its peak in November 2021, and currently stands around $1 trillion.

2. Volume of Trades: Volume describes the total number of coins or tokens traded during a time period. Like securities, the trading volume of a coin is typically larger when its price is changing drastically during periods of high volatility. Positive or negative news regarding the current state or the future plans of a project typically increases the trade volume of a token.

3. Total Value Locked: The overall value of crypto assets placed in a decentralised finance (DeFi) protocol to power the protocol is known as the total value locked of that project. Most DeFi protocols typically allow users to “lock” their assets inside their system to earn interest on their holdings or payouts as rewards. TVL is a metric that indicates the level of adoption of a DeFi project. It has become a crucial metric for assessing retail and institutional interest in DeFi projects. The locked investments are majorly used to fuel the protocol, thereby showing how much the market is willing to provide to sustain a project.

4. Social Discussions and Sentiment: People discuss everything from a project’s upcoming developments, to community outreach and more recently, declaration of bankruptcy on social media platforms like reddit and twitter. While going through the individual tweets about a specific project is not practical, there are certain data points that are quite useful like total number of followers on twitter, the tone of discussions on the project’s official subreddit and even sentiment analysis of how the community feels at a given time about a particular project.

An aggregate of these values for the top 10 tokens can show us how the net sentiments towards the ecosystem have changed over a given time.

5. The Value Proposition of Tokens, and the Ecosystem: We are yet to see how cryptocurrencies and decentralisation will evolve 20 years from now. A useful task to understand and analyse market trends is to actually look at the projects and see what they are building, and the team that is behind the project. For example, back in the 60s, if a couple of Nobel Laureates were building a transistor, it would have been a smart idea to have invested in the team and their project, as it is known as Intel today. At a token level, we can look at the activity data available for the project on GitHub which shows how robust the project’s development is. An aggregate of this data would show us how the teams behind the top projects are working towards building the ecosystem.



Views expressed above are the author’s own.


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