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Oct

2021

12 Factors that Make the Price of Bitcoin Go Up

11 Factors that Make the Price of Bitcoin Go Up

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

In 2009, the Bitcoin network went live and the world changed forever. The first cryptocurrency started out with a value of $0, and it took years before bitcoins gained value in terms of any national fiat currency. But at the time of writing in late September 2021, the value of Bitcoin had risen to over $47,000, after beginning at $0 just twelve years earlier.

There are a number of factors that drive Bitcoin’s prices — including its sudden price surges and steep drops. Here are 11 factors.

1. Supply and Demand

Part of what determines Bitcoin price is supply and demand. The Bitcoin protocol is designed to limit the supply of new coins. A new block of transactions is mined about every 10 minutes, and miners receive a set reward of new bitcoins for finding each block.

This reward amount is steadily reduced overtime and there are only 21 million bitcoins that can ever be mined. As of June 2021, about 18.74 million bitcoins had been mined, leaving 2.26 million bitcoins remaining. It’s estimated that the final bitcoin will be mined sometime around the year 2140.

On the other hand, the fiat currencies that prices are measured in have no supply cap and are always being created in ever-increasing amounts. This can result in more fiat currencies chasing fewer bitcoins, which can lead to higher Bitcoin prices.

2. Bitcoin Halving

Halving is part of the Bitcoin protocol that contributes to the supply and demand dynamics. Rather than new bitcoins being created at a steady or ever-increasing rate, the reward that miners receive for mining new blocks gets cut by 50% every 4 years or so.

In 2009, the block reward was 50 bitcoins. Over the next 11 years, the reward was “halved” three times, or reduced as follows:

• 2012: 25 bitcoins

• 2016: 12.5 bitcoins

• 2020: 6.25 bitcoins

In this way, Bitcoin remains a deflationary currency thanks to the process of Bitcoin mining. Fiat currencies, being inflationary, work in the opposite manner. Their supply increases each year with no limit on how many currency units can be created.

3. Monetary Policy

Because Bitcoin has a fixed supply limit, the price tends to correlate with the supply of new fiat currency being created. An increase in the money supply can be part of what drives up Bitcoin’s price. However, this isn’t a hard and fast rule — and past performance doesn’t always indicate future results.

It is worth noting that throughout 2020 and early 2021, the money supply in the U.S. saw massive increases to the tune of trillions and trillions of new dollars being created. During this same period, the price of Bitcoin rose from under $4,000 in March 2020 to over $60,000 in April 2021. When it comes to questions of what affects the Bitcoin price, monetary policy is thought to be a key factor.

4. Regulatory Factors

Regulatory news can also affect Bitcoin price. Some people believe that national governments will one day create such strict crypto regulations around Bitcoin and companies that use it that the technology will not survive. Because of this fear, sometimes it only takes a simple statement from a regulatory agency to cause prices to tank.

At the same time, some regulation can also be seen as a positive sign. It signals that the technology is seeing increased adoption and becoming more and more accepted. So, when regulatory agencies respond favorably to Bitcoin or announce new regulations that seem benevolent, this can be part of what makes Bitcoin go up.

5. Memes and Social Media

While technical matters and serious issues can contribute to what drives the Bitcoin price, more light-hearted factors can also influence what makes Bitcoin go up or down. Memes circulating on social media can sway sentiment toward crypto markets and possibly impact prices.

6. Mainstream Media

In addition to social media, the regular news cycle can also influence Bitcoin price. Almost every time Bitcoin suffers a price correction, numerous mainstream media outlets begin publishing negative news.

Some of these can be so pessimistic that they fall into the category of what’s become known as “Bitcoin obituaries,” where a media outlet proclaims that Bitcoin has died. Sometimes influential politicians, bankers, or bureaucrats make negative statements about Bitcoin too, leading to similar effects on price.

On the other hand, when overall media coverage is positive, this can make the price of Bitcoin go up. In 2020 and 2021, news about influential investors making bets on Bitcoin were seen as significant factors with regard to what makes Bitcoin go up, as well as a factor in Bitcoin’s volatility.

7. Miners

In Bitcoin mining, powerful computers process transactions for the network, keeping Bitcoin running in a decentralized way. Mining operations continue running, at least in part, with funding from the bitcoins that they mine.

But miners have to be very careful about what they do with their new bitcoins. If miners believe the price of Bitcoin will go up in the future, they are likely to hold their coins for some time. If miners believe prices will go down soon, they might sell their coins immediately.

Miners refusing to sell new coins can be part of what makes Bitcoin go up, as new supply never makes it to crypto exchanges where it could drive prices down.

8. Hash Rate

The Bitcoin hash rate is one of the most important metrics in Bitcoin. The hash rate indicates how hard miners are working to solve the mathematical problems needed to process transactions. The more miners that are contributing computing power, the higher the hash rate.

While there’s disagreement about whether or not hash rate is part of what affects the price of Bitcoin, there does appear to at least be some correlation. If nothing else, a higher hash rate makes the network more secure and signals confidence in the near-term.

Recommended: What is a Good Hash Rate?

9. Network Adoption

Bitcoin is the world’s first decentralized monetary network. The more people using the network, the more valuable it tends to become. (This same principle holds true for things like social media networks, too.)

When it comes to the Bitcoin network, one of the main metrics used to measure adoption is the number of new crypto wallets being created. New wallets indicate that more people are using Bitcoin, some of them presumably for the first time. Sometimes when a lot of new wallets are coming online, this can be a sign of confidence in the technology and be part of what makes Bitcoin go up.

10. Risk Appetite

General sentiment in financial markets can be part of what makes Bitcoin go up. When investors feel comfortable taking on more risk than usual, they could be more likely to put money into Bitcoin.

On the other hand, some Bitcoin proponents believe Bitcoin to be more of a safe haven asset (the opposite of a risk asset). Bitcoin has a limited supply.

11. Technical Analysis

Crypto technical analysis can influence the price action of almost any tradeable asset. TA involves patterns identified by computer-generated data and from human eyes identifying patterns on charts. When a certain pattern emerges, it’s thought that prices could be about to move upward or downward, depending on the type of technical setup.

The Takeaway

When it comes to what makes Bitcoin go up, there are at least a dozen potential factors. Many of them are related to market sentiment, the status of the Bitcoin network, and supply-and-demand dynamics.

Photo credit: iStock/cokada

Oct

2021

Can Dogecoin Reach $100? Or Even $1? $10? $1,000?

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

After rising from about $0.0002 to more than $0.70 in a matter of months, many people have found themselves asking the question “How high will Dogecoin go?”

Many people investing in cryptocurrency for the first time appear curious about DOGE and other altcoins. Even though the DOGE price crashed more than 70% all the way down to $0.20 before recovering somewhat, Dogecoin still finds itself among the top 10 cryptocurrencies by market cap.

But will this always be the case? Can Dogecoin reach $1? What about $10 or even $100 or more?

There are several reasons the odds are against DOGE climbing too much higher. Valuations like $1 or even $10 are theoretically possible. But a price target of $100 or more, isn’t realistic for DOGE, given the way the coin works.

While it’s impossible to predict the future when it comes to the price of DOGE or any other investment, we can make a reasonable hypothesis as to whether DOGE will ever reach $100.

Recommended: How to Buy Dogecoin (DOGE)

Table of Contents

Will Dogecoin Reach $1?
Can Dogecoin Reach $10?
Can Dogecoin Reach $100
Can Dogecoin Reach $1000

Will Dogecoin Reach $1?

Dogecoin reaching $1 is a distinct possibility. This would be less than 50% higher than the all-time high of about $0.70 per DOGE.

The question “can Dogecoin reach $100,” or $1, or any price for that matter, has to do with two things: DOGE’s market cap and its mining dynamics.

Understanding the size of the DOGE market cap in relation to its new supply makes it clear how high the price of DOGE can or can’t go. Every minute, miners receive a reward of 10,000 DOGE for solving a new block. This amounts to 5 billion new Doge coins being minted each year.

Recommended: Will Dogecoin Ever Be Capped?

By the end of the year 2030, there will likely be about 180 billion DOGE circulating. For the price of DOGE to reach $1 by that time, the market cap of Dogecoin would have to be $180 billion.

The current market cap of DOGE at the time of writing is about $37 billion. There are currently 130.8 billion DOGE in circulation. To reach a valuation of $1 per coin, the market cap of DOGE would have to more than triple, rising by more than $80 billion.

To get to $1, then, there would have to be a lot of money flowing into DOGE. While some believe this might be possible, many others don’t foresee a $1 valuation in DOGE’s future.

Can Dogecoin Reach $10?

For the DOGE price to continue climbing, there has to be much more money flowing into DOGE than new coins being mined. Because DOGE has no supply limit, and the block reward is so large (10,000 coins per block, compared to 6.25 coins per block for BTC), it becomes exponentially harder for Dogecoin to achieve a higher price over time.

The 2021 bull market in Dogecoin saw its price rise from $0.0002 to $0.70 in a matter of months was a unique event. While the exact conditions that lead to any market event can be hard to pin down, there are a few unusual circumstances that combined at the same time, likely giving DOGE a huge boost.

• It was in the middle of a Bitcoin bull market, when BTC and other cryptocurrencies were also hitting new all-time highs.

• The coronavirus pandemic of 2020 had been going on for less than a year, and many people around the world were still staying home. Some of them were investing for the first time.

• Dogecoin saw several notable celebrity endorsements in quick succession with one another.

Owing to the impact of these headlines, some have accused DOGE of functioning like a giant pump-and-dump scheme because of its quick rise and fall.

That said, it’s possible for DOGE to reach $10, at least briefly, at some point in the next decade.

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Can Dogecoin Reach $100

It would be nearly impossible for Dogecoin to reach $100, because there isn’t quite enough money in the whole world.

Every $1 that the Dogecoin price were to increase would require an additional $180 billion in 2030. To reach $100 by 2030, then, there would have to be $18 trillion invested in Dogecoin.

Global GDP is estimated to be about $87 trillion. The GDP of China is around $15 trillion, while the GDP of the U.S. is about $21 trillion.

In other words, a $100 DOGE price would require a market capitalization of more than the annual gross-domestic product of the entire nation of China by the year 2030. It doesn’t take a market genius to determine that this simply isn’t going to happen.

Even if that much money wanted to find a home in DOGE, it’s unclear whether or not crypto exchanges would be able to handle that kind of volume.

There’s one more factor to consider. The total holdings of all the DOGE that has been mined, as of 2021, are centralized into the hands of just a few crypto wallets.

One wallet holds more than 25% of all the DOGE in existence, while the top 20 wallets hold over 50% of all DOGE.

How high could Dogecoin go? The answer is: Probably not that high. If for no other reason, the people who control a few wallets with billions of coins in them are likely to take some profits whenever the price of DOGE sees a sharp rise, capping any gains.

Can Dogecoin Reach $1000

If the answer to the question “can Dogecoin reach $100” is no, then there’s no way that Dogecoin could ever reach $1,000.

It would take so much money for this to become reality that there’s really no scenario where it could happen.

Much of this stems from the fact that DOGE is a meme coin with little technical development. Traders typically use it as a vehicle for transferring value or seeking speculative gains, rather than HODLing it.

This represents a stark contrast to Bitcoin, which has become more of a mainstream store of value and investable asset class due to its active development community, high level of network security, and its fixed supply limit of 21 million bitcoins. The supply of newly mined bitcoins also gets cut in half every 4 years, whereas no such “halving” event ever occurs for Dogecoin.

Bitcoin’s market cap eclipsed at the time of this writing is above the $1 trillion mark. Because the supply of BTC is always declining, the market cap and price can continue rising, absent some unforeseen catastrophe.

The same cannot be said for other types of cryptocurrency like Ethereum and Dogecoin that have no supply cap.

The Takeaway

Much of the answer to the question “Can Dogecoin reach $100?” has to do with simple supply-and-demand dynamics. Because of the way DOGE mining works, it’s nearly impossible for one DOGE to reach a valuation of $100. That said, $1 per DOGE could happen, and $10 is a longshot but not completely outside the realm of possibility.

Photo credit: iStock/Alexander Buerkle

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Oct

2021

Bitcoin Fees: How to Save on Bitcoin Transaction Fees

Bitcoin Fees: How They Work and 3 Ways to Save on Them

By Matthew Zeitlin | Growing Wealth, invest, Investing | Comments Off

Bitcoin is a decentralized digital currency based on blockchain technology with an overall value approaching $1 trillion. Currency can be exchanged without an intermediary like a bank or payment processor and there’s no central government or central bank in charge of creating new currency or affecting its value.

But that doesn’t make Bitcoin transactions free.

Recommened: How to Invest in Bitcoin

What are Bitcoin Fees?

There are two types of Bitcoin fees and costs. Most exchanges and brokerages will charge a fee for trading Bitcoin (as they would charge a fee on any other trade), and on top of that there are also Bitcoin transaction fees.

How Do Bitcoin Transaction Fees Work?

When a Bitcoin transaction occurs, the network usually keeps a small percentage of the transacted amount.

Traditional bank or money transmitters might charge a fee on a transaction to help pay for the cost of maintaining the network, increase profit margin for the company, to protect against legal or reputational risk by working with the customers that are transferring money, or to cover the risk of having to reverse the transfer or have it not be accepted.

For Bitcoin, much of this does not apply — there’s no company that controls the network and the transfers are final and irreversible. So why are there Bitcoin transaction fees? The Bitcoin fees exist because the Bitcoin network is maintained by its users and because Bitcoin mining needs to be incentivized by the system itself.

Bitcoin miners, which are essentially networks of computers which power the network through “proof of work” (i.e. solving hard math problems), maintain the network and power through the transactions. The more computing power coursing through the network, mining new blocks of Bitcoin, authorizing, and authenticating transactions, the higher the Bitcoin hash rate. That’s a good thing, and to fund this, incentives are required.

Bitcoin miners are incentivized in two ways: they earn new Bitcoin through mining, and they earn transaction fees.

Why Do Transaction Fees Go Up and Down?

Transaction fees depend on several factors, but the most important one is the overall use of the Bitcoin blockchain. Basically, it’s a matter of supply and demand.

When there is a relatively large amount of computer power dedicated to mining a relatively small amount of Bitcoin transactions, fees go down.

When there are lots of transactions being initiated simultaneously, fees can go up, as the network can only process so many at any given time. Miners will work harder to authenticate and process transactions with higher fees.

3 Strategies to Save on Bitcoin Transaction Fees

There are ways to save on Bitcoin transaction fees. While you may not avoid them outright, these strategies may help you incur smaller fees.

1. Know What You’re Paying — or Will Pay

The first step to avoiding high Bitcoin transaction fees is to know exactly what they are. Websites like BitInfoCharts are dedicated to tracking Bitcoin transaction or transfer fees, and these fees are also a frequent topic of conversation and news coverage in the cryptocurrency-focused media. So it’s possible to keep track of fees and wait to do a transaction when the fees are lower.

2. Use a Wallet With a Set Fee

Bitcoin transactions happen through a crypto wallet — the software or hardware that allows you to store, send, and receive Bitcoin. Many popular, mainstream exchanges also have wallets and will calculate and pass on Bitcoin transaction fees.

There are a variety of wallets that allow you to set your own fee — though that can mean that a transaction you wish to make may not be prioritized or go through immediately. This may not be important to you if you’re doing a small number of transactions or just one transaction, but the option may be valuable if you’re looking to save on Bitcoin transaction fees.

3. Use the Lightning Network

Bitcoin transactions are slower and more expensive than many transactions that happen with fiat currency like U.S. dollars. To fix this, a group of developers created the Lightning Network, a protocol that sits on top of the blockchain and allows users to transfer Bitcoin much faster and with far lower fees than normal, “on-chain” transactions.

Using Lighting Network for transactions has not yet reached mass adoption in the Bitcoin community, largely because it’s more complicated and requires more technological know-how than typical transactions. However, for anyone with that know-how who’s doing frequent Bitcoin transactions or transfers that are time-sensitive, it may be an option to reduce Bitcoin fees.

The Takeaway

The problem of Bitcoin transaction fees is a long-lamented subject in the Bitcoin community. But the way the network is set up, these fees are a necessary evil. They incentivize miners to devote computer power to verify the transactions and keep the blockchain growing.

Photo credit: iStock/happyphoton

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Oct

2021

DAOs and How They Work

By Matthew Zeitlin | Growing Wealth, invest, Investing | Comments Off

One of the strongest trends in technology has long been decentralization — from the creation of the internet connecting academics across the world, to the world wide web providing a platform for strangers to connect with one another. The advent of cryptocurrency has spurred another round of decentralization, the decentralized autonomous organization, or DAO.

What Is a DAO?

Decentralized autonomous organizations (DOAs) are innovative and potentially promising models for bringing blockchain technology to new areas of organization, beyond issuing and transferring value across the blockchain (aka currency). For example, DAOs could be used to develop blockchain in insurance or blockchain in real estate.

The goal of DAOs is to remove expensive and time-consuming processes and democratize how organizations are conceived and run, by doing everything in code. DAO stands for:

• Decentralized: This means no one person or group is in charge of the organization by virtue of a title. Instead, decisions are made by the members of an organization by virtue of how big a stake they have in it.

• Autonomous: The DAO is run entirely according to its smart contracts and the decisions of its members.

• Organization: DAOs can still act as a single entity, producing things and acting on behalf of all its members.

While DAO typically refers to projects using Ethereum (aka Ethereum DAOs), some scholars have suggested that Bitcoin itself is a DAO.

It’s important when discussing Ethereum DAOs or DAOs in general not to get them confused with “The DAO,” a group that raised money to invest in cryptocurrency projects. The organization was hacked and more than $50 million of about $160 million worth of Ethereum raised was stolen.

How Do DAOs Work?

While there have been procedures for more open and democratic organizations for as long as people have been gathering to make decisions, DAOs are an innovation that specifically hinges on blockchain technology.

DAOs are typically built on top of the Ethereum blockchain, which supports the second-most popular and valuable cryptocurrency in the world and is designed specifically to support “smart contracts” or agreements that execute automatically and don’t require third parties to enforce.

Imagine a traditional organization as a bundle of contracts and agreements between the members: an employment agreement specifies what an employee is supposed to do in exchange for pay, contracts with suppliers, loan terms with banks, and so on. These contracts all need to be specified on paper and their execution can be up to third parties and legal systems to oversee. For the DAOs, these are problems to be solved with code.

How Are DAOs Funded?

Typically DAO contracts are also set up for the sale of a token, as a way of raising money for the DAO and for establishing who gets to be involved in the decision-making. Token holders vote based on a process specified and executed in the smart contracts themselves. The idea is that token holders will want to maximize the value of their tokens, thus ensuring the DAO does not work to the advantage of any one employee or group, but instead to the token holders as a whole.

DAOs: Pros and Cons

Pros	Cons
Change always happens by vote	Can be hard to turn around in a crisis
Transparency through open-source	Organizational discretion is difficult
Smart contracts avoid after-the-fact tinkering with agreements	If contracts and code are poorly written, can be hard to change without consensus
Organizational roles specified in code	Makes taking on responsibilities beyond what’s specified in code difficult
Decentralization means everyone in the organization is responsible for the organization’s decisions	Lack of accountability for any one individual, like a central leader or chief executive
Open source means more eyes on critical functions and the best ideas rise to the top	Legal ambiguity could make decision-making difficult or force DAOs to engage in more centralized, traditional behavior
Everyone involved in decision-making has a stake	Token-based decision-making can make consideration of other stakeholders’ interests more difficult

Examples of DAOs

There are a variety of DAOs in operation right now. These are some of the well known ones.

MakerDAO

MakerDAO is one of the most prominent uses of the DAO structure and one of the most popular DeFi (or decentralized finance) projects that could serve as an example of how to use blockchain in the finance industry. MakerDAO produces a token, known as Dai, that has a steady $1 U.S. value and is used for financial products like loans. There’s also the MKR token, which is for governance of the overall project. This means that holders of MKR can “vote on changes to the protocol, like the addition of new collateral assets and protocol updates.”

Augur

Augur is an Ethereum-based prediction market, meaning it allows people to place bets on events in the future. The platform is a bundle of smart contracts and OracleDAO was created to assist with its development.

Uniswap

Uniswap is a decentralized cryptocurrency exchange specifically for “ERC-20” tokens with a governance token called UNI. ERC-20 is a standard on the Ethereum blockchain that is used for applications and services built on top of Ethereum. In the ongoing dispute between centralized vs decentralized exchanges, Uniswap is decidedly on the side of the latter.

💡 Recommended: What Is a Governance Token?

How to Invest in a DAO

Investing in a DAO isn’t that different from buying any other form of cryptocurrency. Here are the simple steps to do it.

1. Have a wallet. A crypto wallet is a software program or hardware and software system that allows an investor to safely and effectively store and trade cryptocurrencies including tokens issued by DAOs.

2. Do your research. There are new crypto projects starting every day. It’s important to have a detailed understanding of what the developers of the one you’re interested in are attempting to do, and that you are well aware of whatever rights you gain by investing in a DAO and purchasing a governance token.

3. Find an exchange. Some exchanges host tokens, including MKR, which can be bought and sold using their tools. Uniswap, for example, hosts token exchange.

4. Be an active participant. Study how governance works in the DAO you’ve invested in and be a conscientious and energetic participant.

The Takeaway

DAO stands for decentralized autonomous organization. In such organizations, there is no one person or small group of executives making decisions — instead, anyone holding tokens issued by that DAO has a say in policy and other organizational matters.

Photo credit: iStock/Pekic

Oct

2021

Crypto Technical Analysis: What it is & How to Do One

By Brian Nibley | Growing Wealth, invest, Investing | Comments Off

Crypto technical analysis involves using mathematical indicators based on previous price action data to try to predict future trends. The basic idea is that markets behave according to certain patterns and that once established, trends heading in a certain direction often continue along the same course for some time.

Broadly speaking, investors want to buy when markets are low so they can sell higher at some point in the future, and thus make a profit. Conducting technical analysis before entering a position is one way to try to identify price levels that might be considered low.

There’s no single, all-encompassing method for crypto technical analysis. Each trader will prefer to use different indicators and will likely interpret them slightly differently. It should also be noted that crypto technical analysis, similar to the technical analysis applied to stocks and other securities, is not a crystal ball; it’s not an guaranteed predictor of performance.

Crypto Technical Analysis: The Basics

There’s a long list of different technical indicators and chart patterns that can be used to conduct crypto technical analysis. Entire books have been written and courses created on the subject.

Here are just a few common technical indicators that traders can use when learning technical analysis.

Candlestick Charts

Traders often prefer candlestick charts for their high level of detail. Rather than condensing data into one point for each time interval, candlesticks display four different price levels for each interval. These include (in order of top to bottom, visually):

• High price

• Opening price

• Closing price

• Low price

Candlesticks show this information in the form of a bar and two wicks. The peak of the top wick is the high price and the tip of the bottom wick is the low price.

The body of the candlestick can appear either green or red. Red indicates that prices ended the day lower than they opened; green indicates that prices ended the day higher.

On green candlesticks, the top indicates the closing price and the bottom the opening price. For red candlesticks, the top indicates the opening price and the bottom the closing price.

Each candlestick is read in the context of surrounding data points, and offers a detailed look at how investors are buying and selling crypto during a certain period of time.

Recommended: Important Candlestick Patterns to Know

Support and Resistance Levels

The terms support and resistance refer to levels where prices tend to bottom or peak, respectively. Traders might identify these levels and then use them to try and make informed trading decisions.

How are support and resistance determined? There are many possible ways. Sometimes it could be as simple as looking at a chart and pointing out where prices have repeatedly pulled back (in the case of resistance) or bottomed out (in the case of support).

Once identified, traders might use these price levels to inform their trading strategy. For example, stop-loss orders might be placed at support, while sell orders to take profits might be placed at or above resistance.

There are many different ways to use support and resistance, because these levels can either be used to try to predict price reversals or, if prices continue beyond them, indicate that a new trend has emerged. If prices keep rising above resistance, this might indicate sustained momentum to the upside. Likewise, if prices continue falling beneath support, they might continue falling even more.

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Relative Strength Index (RSI)

The Relative Strength Index is a favorite among veteran and novice traders alike. This indicator presents itself as a simple line graph below a price chart.

The line oscillates between the values of 0 and 100, with 50 being neutral. A higher value is thought to indicate overbought conditions, while a lower value is thought to indicate oversold conditions.

Like many technical analysis tools, the RSI is best used in conjunction with other indicators. For example, if prices for a cryptocurrency were approaching a well-established support level at the same time that the RSI was giving a low reading of 20, then the odds of an upcoming price rally could be higher than usual.

Average Directional Index (ADX)

The average directional index is a short-term indicator used to help investors determine how strong a trend is. The higher the ADX, the more momentum there might be behind current trends.

ADX is simply the average of the values of directional movement lines over a particular period. These lines are calculated with current low and high prices. Similar to the RSI, ADX can have a value between 0 and 100.

But unlike many other indicators, the ADX rarely rises above 60. Chart analysts generally believe that an ADX of 25 and up indicates trend strength and a reading below 20 means there is no trend. Between 20 and 25 is considered neutral, or no trend.

When the ADX line is rising, it’s a sign that the current trend is growing stronger.

Moving Averages (MAs)

While the ADX helps investors determine the strength of a trend, moving averages can be used as a tool to help determine the direction of a trend. A moving average summarizes data points of a cryptocurrency over a set period and divides the total by the number of data points to create an average. The term “moving” average is used because the number is constantly updated using the latest price data.

Long-term moving averages are thought to be stronger indicators, as they contain more data. But MAs can also be tracked in the short term.

There are different types of moving averages, different time lengths for them, and different ways they can be used to provide clues to the direction of a trend.

One famous bullish setup based on MAs is referred to as the “golden cross.” This occurs when a short-term moving average moves above a long-term moving average, most commonly the 50-day MA above the 200-day MA.

Recommended: 5 Bullish Trend Indicators

Trend Lines

Trends lines are just what they sound like — lines that illustrate potential trends. These can take many forms and sometimes multiple trend lines can be drawn on the same chart to show more complex patterns.

In their simplest form, trend lines are single lines connecting multiple high or low price points. The more points that connect on the same line, the stronger the trend might be.

Trend lines can be drawn to show a variety of different crypto technical analysis setups.

Cup and Handle Pattern

The cup-and-handle pattern is a famous bullish set-up. It consists of a price chart over which a cup (the bottom half of a circle) and a handle (a downward-slanting line at about a 45-degree angle) can be drawn.

For this to happen, prices generally must fall, briefly trade sideways, rise for about the same length of time as they originally fell for, and then have a steep but brief drop. The final drop creates the handle, at which point the pattern is thought to be confirmed, and prices could rise.

The inverse of this pattern can also happen and is thought to be bearish. If an upside-down cup and handle happens, watch out, as prices could fall.

The Takeaway

Crypto technical analysis is just one of many things investors might want to know before investing in crypto. That said, technical analysis of cryptocurrency can be highly subjective even though the indicators themselves are based on mathematics.

It should be noted that no technical indicator is correct 100% of the time. Even when multiple indicators converge on the same conclusion, prices could still react differently than expected. The best a trader can hope for is an increased chance of making a decision they feel good about, based on available information.

Photo credit: iStock/SDI Productions

First Trade Amount		Bonus Payout
Low	High	Bonus Payout
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

SOIN0421185

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1. Supply and Demand

2. Bitcoin Halving

3. Monetary Policy

4. Regulatory Factors

5. Memes and Social Media

6. Mainstream Media

7. Miners

8. Hash Rate

9. Network Adoption

10. Risk Appetite

11. Technical Analysis

The Takeaway

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Will Dogecoin Reach $1?

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Can Dogecoin Reach $100

Can Dogecoin Reach $1000

The Takeaway

Bitcoin Fees: How They Work and 3 Ways to Save on Them

What are Bitcoin Fees?

How Do Bitcoin Transaction Fees Work?

Why Do Transaction Fees Go Up and Down?

3 Strategies to Save on Bitcoin Transaction Fees

1. Know What You’re Paying — or Will Pay

2. Use a Wallet With a Set Fee

3. Use the Lightning Network

The Takeaway

DAOs and How They Work

What Is a DAO?

How Do DAOs Work?

How Are DAOs Funded?

DAOs: Pros and Cons

Examples of DAOs

MakerDAO

Augur

Uniswap

How to Invest in a DAO

The Takeaway

Crypto Technical Analysis: What it is & How to Do One

Crypto Technical Analysis: The Basics

Candlestick Charts

Support and Resistance Levels

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Relative Strength Index (RSI)

Average Directional Index (ADX)

Moving Averages (MAs)

Trend Lines

Cup and Handle Pattern

The Takeaway

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