Familiar with non-fungible tokens (NFTs) and cryptocurrencies? How about decentralized finance (DeFi), decentralized autonomous organizations (DAOs), or Real World Assets (RWAs) on blockchain?
Most people are usually familiar with the first two. And, in most cases, only a few know of the rest. So, most people end up limiting their analytics understanding to the first two.
Well, today you get to join the few. The cryptocurrency market is wide. Whether you decide to invest in cryptocurrencies, NFTs, or any other cryptocurrency market, here’s how you win at the analytics game, ensuring you make smarter choices.
Analyzing Cryptocurrency Market Data: A Step-by-Step Tutorial
Before we delve in, ensure you have a select cryptocurrency market in mind. This way, if you are a beginner, you’ll start creating your own data-driven trading or investing strategies.
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For the experienced cryptocurrency market traders or investors, this analytics guide should enhance your current cryptocurrency market analytics knowledge. Let’s go!
Assess the meaning and impact of various market metrics
Market metrics vary from market to market. You are to dig into these metrics and understand how they affect different decisions in the market.
For instance, in the cryptocurrency coin markets, there are price, supply, trading, and volatility metrics — all serving various purposes.
If you don’t understand the essence of the metrics in your respective market, you are more likely to fall for scams (pump-and-dump schemes), make poor investment decisions, misunderstand supply and inflation, and more.
Pinpoint a reliable data source
When undertaking cryptocurrency market data analytics, you don’t want to source data from a poor data source. This leads to making decisions based on misleading market trends, or poor trading or investment data.
To ensure you are analyzing a reliable cryptocurrency dataset, source the dataset from trusted platforms that have been around for years.
Always review how a select platform collects, calculates, and updates their data. Certain markets like the cryptocurrency coin market require that you have access to near real-time updates to stay competitive.
Lay out a focused set of objectives
So far, you understand the key metrics in your select cryptocurrency market and have a list of reliable data sources. Before you proceed to collect and analyze data, you must define clear objectives.
Having a focused set of objectives serves as a structured approach to data analytics, reducing the risk of confirmation bias.
Confirmation bias refers to a situation where you collect data that seems to support a preconceived idea. It could be an idea from a quick look at previous market trends or the news.
A focused set of objectives ensures analysis is only based on facts, not hype. This ensures that you focus on the right market metrics and avoid impulsive or emotional decision making.
Retrieve and analyze data using relevant analytics techniques
With clear objectives in mind, it becomes easier to determine what metrics or data you need.
To achieve the objectives, you must select a relevant or applicable data analytics technique based on the metrics or data you are to collect.
For instance, if you want to determine whether a certain cryptocurrency is worth holding long-term, you need to collect metrics around cryptocurrency utility, use cases, network activity, developer activity, and liquidity metrics.
After collecting the necessary metrics, you apply fundamental analysis to examine the intrinsic value of a token or coin.
Through fundamental analysis, you get to spot long-term winners instead of hyped coins. You also reduce the risk of putting your money in low-quality projects.
And, you could also land undervalued projects before they become mainstream.
Develop new strategies or refine current ones
As mentioned earlier, the cryptocurrency market is huge. Many take advantage of the NFTs and cryptocurrency token markets, most a times not digging further into other markets.
Fortunately, that’s not the case for you now. To strategically navigate a cryptocurrency market, you ought to document your data analytics results.
Progressively journaling your findings helps with creating new strategies or refining current ones. A strategy not only helps you manage risks, but it also helps you spot opportunities to adjust your portfolio.
Track market sentiment and current news analytics
Cryptocurrency markets constantly evolve as people get in and out of the markets. Some, especially tokens, crush at some point. That’s why it is critical to monitor changes in your select market.
The two most popular ways to track changes include market sentiment analysis and news analytics.
Market sentiment analysis aims to determine the overall mood of those in a specific market — do they believe in the market thriving or are they skeptical?
For instance, a look at the fear and greed index can tell you when there’s extreme fear or greed in a market. Also, social media discussions can reveal these cycles of greed and fear.
News analytics, on the other hand, mostly provide updates on market value and regulation.
When regulatory bodies come up with new regulations, it is critical for you to be aware because some new laws could heighten market fear or uncertainty.
Stay informed about your select market
Lastly, cryptocurrency market trends change rapidly. Opportunities come and go, including signals to leave a market before it crushes.
Yes, the market itself can tell you when it is time to abandon ship. However, you must keep an eye on major news, market sentiment shifts, and technology updates. Sometimes, security or regulatory risks may force the team working on a certain cryptocurrency project to abandon it.
Overall, being updated on adoption rates, project developments, and trends should help you take advantage of opportunities and also avoid bad trades or investment moves.
Wrapping Up!
Whether it’s NFTs, DeFi, blockchain gaming, or cryptocurrency coins, the secret to success is making smart decisions. And, how do you do that?
Relevant and accurate data plus analytics — without the two, you are more likely to make poor investment decisions, fall for scams, or lose a lot of money because you are making decisions based on your emotions.
Thanks to this tutorial, you are now equipped with the necessary knowledge on how to strategically approach cryptocurrency market data analytics. Remember, the markets are ever-shifting. So, stay informed and let the numbers speak.
This blog was published on https://thedatascientist.com/cryptocurrency-market-analysis-a-step-by-step-guide/
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