When it comes to analyzing the market, two schools of thought are used for the purpose, Fundamental and Technical analysis. Investors tend to use both ways to forecast the market and to make the right investment strategy to get maximum return on their investments.
As cryptocurrency is highly volatile, it requires some serious trading skills and market knowledge. Having complete expertise in fundamental and technical analysis is necessary to make a strong investment strategy to get maximum profit in the future.
Here we will discuss what is the key difference between Fundamental and Technical analysis and which one is more reliable.
Fundamental analysis is done when an investor attempts to determine the intrinsic value of an asset. This is done by evaluating all the financial and economic factors, and determining how valuable the asset will be in the future for him. The data used for this analysis is current information, the project team, and the people already in the project. The main objective of fundamental analysis is to check whether the specific asset is undervalued or overvalued and it is usually done for long-term investments.
Technical analysis is usually done for short-term investments and done correctly, it can give us a better exploration of the market in a way that fundamental analysis cannot, and this method is usually considered more effective in the cryptocurrency market. Investors use statistical factors such as historical price patterns, graphs, and volume and market capital of the digital asset. Supports and resistance are the two most common terms in this analysis. A support level is where a downtrend in an asset’s price is supposed to halt due to more buying interest. On the other hand, a resistance level is a point where an uptrend in an asset’s price is paused due to high selling pressure.
Which one is more reliable:
Both analyses are different in their way having their own pros and cons along them and investor tend to use both ways to have a better view of the future market, especially in crypto where nothing is predictable.
Read related content here.