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Ask CryptoVantage: Is There a Way to Tell When a Coin is Peaking?
Cryptocurrencies are a new, exciting, and sometimes confusing investment opportunity.
There are currently over 14,000 different cryptocurrencies that you can invest in. Each has its own set of risks and rewards to consider before deciding on an investment strategy – but the most important thing is to know when to make an entry and an exit into the market. For this reason, here are a few methods you can use to tell when a particular crypto is at its peak and therefore a signal to take profit.
1) Price History
The first way to tell whether a crypto coin has hit its peak price is by looking at the price history of the crypto. You can do this easily on websites such as Coinmarketcap.com, or Trading View where the price history of the coin is depicted with a graph or chart.
From a price history analysis, you can determine the historical market movement of the specified crypto token and therefore act accordingly. For instance, if bitcoin is fond of always rallying whenever halving occurs, you can make a guess that its price will once again peak with the introduction of a new halving event.
2) News Surrounding the Coin
The next method of determining if a cryptocurrency has hit its peak price is by looking at its overall market sentiment. This is very important because the positive or negative feedback from traders and investors can lead to an increase or decrease in value.
When something happens that affects or involves the specific cryptocurrency you are looking into, check to see how the crypto community responds on social media channels such as Reddit, Facebook, and Twitter. The response of traders and investors to these news items can help you determine if your cryptocurrency of choice is peaking or dipping in value. When something positive happens that affects the price of a specific cryptocurrency, like an NFT platform launch or major partnership announcements, look to see how much optimism is surrounding the introduction of the new platform or company. If you see a lot of positive sentiment surrounding these news items, it means that all traders and investors are pleased with the change in value and likely to continue buying.
When something negative happens that affects the price of a specific cryptocurrency, like exchange security breaches or Bitcoin ETF rejections, check to see what the overall sentiment surrounding the news is. If you have a strong feeling that negative market sentiment will affect the price of a crypto asset you are holding, take advantage of the current high valuation and take profit while at the top.
3) Trading Volume on Crypto Exchanges
Another effective way to use when determining whether a crypto asset’s price has hit its peak is to check its trading volume across multiple crypto exchanges. Here, you want to see if the trading volume of the specific crypto is increasing over time. If this is the case, it means that there is a constant demand for this particular cryptocurrency.
A lack of trading volume on an exchange is a strong sell signal because it can be interpreted as a sign that traders are not interested in entering buying positions in a crypto market pair and therefore a signal of a market at its peak.
Conclusion
The crypto market is still in its infancy with less than two decades of its existence. Therefore, compared to traditional markets, there simply isn’t enough data to accurately determine a market at its peak. These few methods we have discussed will help you identify a crypto market at its peak thus allowing you to make appropriate investment decisions.
