Cryptocurrency Market Analysis
- Market Capitalization Analysis
There are 1.8 million cryptocurrencies (as of August 2023) in circulation and the market size of cryptocurrencies in terms of transactions is USD 1.05 trillion. Cryptocurrencies are virtual currencies that exist digitally and has no regulating authority. Cryptocurrencies use blockchain technology that manages and records transactions. It uses a peer-to-peer system that enables users to send and receive payments from anywhere in the world. The cryptocurrency market is a segment based on the market capitalization of a large number of cryptocurrencies.
- Market Dominance
Market dominance refers to the ratio of particular cryptocurrency market capitalization to the overall market capitalization of cryptocurrencies. It serves as a metric used by crypto traders in trying to get a pulse of the market and spot possible trends and trading opportunities. It can help traders decide how to position themselves in the market.
Bitcoin dominance is 48.3% which is calculated based on Bitcoin’s current market cap. Bitcoin’s market cap is $508.01 billion and the global crypto market cap is $1.05 trillion. Dividing $ 508.01 billion by 1.05 trillion equals 48.3%. Even though thousands of other cryptocurrencies are available. The crypto market is dominated by Bitcoin and Ethereum. Ethereum’s and Bitcoin’s market capitalization comprise more than 67% of the crypto market. Ethereum dominance is 19.0%.
Cryptocurrencies by percentage of total market capitalization
Above pie chart shows the dominance of Bitcoin,Ethereum and other cryptocurrencies. Bitcoin and Ethereum together made up more than half of the crypto market and the rest lies with other cryptocurrencies.
- Fear and Greed Index
The crypto market behavior is very emotional. People tend to get greedy when the market is rising. Also, people often sell their coins in irrational reactions to seeing red numbers. There are two simple assumptions:
Extreme fear can be a sign that investors are too worried. That could be a buying opportunity.
When investors are getting too greedy that means the market is due for a correction.
Source: koinx.com
When the value is closer to 0, the market is in extreme fear and investors have oversold irrationally. When the value is closer to 100, the market is in extreme greed, indicating a likely market correction. On 22 August 2023, the index is 34 which represents fear.
Cryptocurrency Market Trends
There are three types of market trends in cryptocurrency
- Bullish Trend: Bullish trend is an upward trend in the prices of the market or an overall rise in market indices, characterized by high investor confidence.
- Bearish Trend: Bearish trend is a downward trend in the prices of the market or an overall fall in the market indices
- Neutral Trend: Neutral trend can occur after a sustained increase or decrease in price when the price begins hitting levels of resistance or support there is a period of consolidation. These trends can continue for weeks or even months at a time.
In the above chart:
- green arrow shows a bullish trend from 2021 to 2022 where the market tends to rise.
- yellow shows a neutral zone from late 2018 to early 2021 showing a market in balance. This could precede a larger upward or downward movement.
- Red arrow depicts a Bearish trend from late 2022 to early 2023 with asset prices down considerably the market depicts a downward movement currently.
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Conclusion
The cryptocurrency market has experienced immense growth over the past decade making it one of the most popular markets in the financial world. Cryptocurrencies have taken the world by storm attracting investors and traders from all over the globe. The cryptocurrency market is also known for its volatility, with prices fluctuating rapidly and often unpredictably. This volatility has made the market attractive to traders who thrive on taking risks and making quick profits. However, it also means that the market can be risky. Overall the cryptocurrency market is a dynamic industry that is constantly evolving with new opportunities and risks emerging on a regular basis.
Frequently Asked Questions (FAQs)
How to know which crypto will rise?
Up-to-date information about cryptocurrency trading is easily available online. Those digital currencies with increasing prices and volume of trades are likely to be those that have momentum going forward.
How many cryptocurrencies are in circulation?
There are approx 10,000 cryptocurrencies (as of August 2023) in circulation however the figure keeps changing.
What is market cap dominance?
Market cap dominance is the ratio of a particular cryptocurrency market capitalization to the overall market capitalization of cryptocurrencies.
Is it important to analyze market trends before investing in crypto?
To master crypto investment it is important to start with a solid foundation of knowledge. Research different cryptocurrencies and analyze their trends.
Can anyone predict crypto market?
It is impossible to predict the future of the crypto market with absolute certainty, but it can be assumed.