Charting future prices: An intro to crypto technical analysis
Jul 15, 2025・5 min read
Prices for digital assets are always in motion. With crypto’s 24/7 cycle, traders don’t have the luxury of “off hours” to review performance without constant fluctuations. In such a volatile environment, traders need tools to extract insights and set up effective positions. One way to bring order to the chaotic crypto market is through "technical analysis," which helps chart a path forward.
While technical indicators can't guarantee perfect predictions, they provide actionable data that simplifies the process of making informed decisions. In this guide, we’ll explore the basics of crypto technical analysis, helping traders gain confidence in assessing risks and managing market turbulence.
What is cryptocurrency technical analysis?
Crypto technical analysis is synonymous with studying price charts. Rather than considering external factors like news or market sentiment, analysts examine historical price data and trading volumes to spot patterns or trends. It also involves using various charting indicators, which offer traders detailed insights into a cryptocurrency's movements and help identify optimal entry points for trades.
Crypto technical analysis versus fundamental analysis
While crypto technical analysis relies on chart movements to predict a currency's future value, fundamental analysis evaluates its intrinsic value through less tangible factors. For example, a fundamental analyst focuses on the expertise of a project's developers, official documentation (like third-party code audits and white papers), and the potential demand for the cryptocurrency's primary use case.
By reviewing a cryptocurrency's roadmap, competitive landscape, regulatory concerns, and token issuance schedules, fundamental analysts aim to determine its fair value and decide whether it’s undervalued or overvalued. While technical traders may consider some fundamental aspects, this research approach is typically associated with long-term investing.
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Common cryptocurrency chart analysis tools
There are many technical indicators for analyzing a cryptocurrency's price patterns, but traders often rely on the following:
Candlestick charts
Instead of using a zig-zagging line, candlestick charts give a detailed view of daily price action. Each candlestick represents the highs, lows, opening, and closing prices within a set timeframe. The thicker "body" shows the opening and closing prices (red or black for declines, green or white for increases), while thin lines at the ends highlight price extremes. Candlestick patterns can suggest potential bullish or bearish trends.
Trend lines
To better visualize movements on candlestick charts, traders draw thin, straight "trend lines" around a cryptocurrency's price activity. These lines define price channels, wedges, or triangles, marking support at the bottom and resistance at the top, helping traders identify market momentum and key areas for buying and selling.
Moving averages
Unlike trendlines, moving averages (MAs) are curving lines that smooth out price data over a predefined period (e.g., 50 or 100 days). They help traders see if a cryptocurrency's price is above or below average, indicating bullish or bearish sentiment. MAs often serve as points of resistance and support, especially popular ones like the 50-, 100-, and 200-day averages.
Volume bars
Displayed as bars at the bottom of a chart, volume shows how much of a cryptocurrency was traded in a specific timeframe. High volume during price swings often signals genuine trends, while low volume can suggest consolidation or market manipulation.
Relative Strength Index (RSI)
RSI is an oscillating indicator that ranges between 0 and 100, measuring the speed and magnitude of recent trades. An RSI below 30 suggests a cryptocurrency is oversold, while readings above 70 indicate it’s overbought. This helps traders gauge whether buyers or sellers are in the dominant position, with a high RSI pointing to strong buying pressure and a low RSI indicating stronger selling pressure.
Moving Average Convergence/Divergence (MACD)
MACD is a momentum indicator that tracks buying and selling trends. It uses multiple MAs (commonly 9-, 12-, and 26-day periods) and a "MACD line," which subtracts the 26-day MA from the 12-day MA. A histogram visualizes the difference between the MACD line and the 9-day MA, offering clues into the strength of price trends or potential reversals.
Benefits of crypto technical analysis
Using crypto technical analysis takes some stress out of choosing when to make a move. While chart patterns don’t guarantee outcomes, they offer traders a scannable frame of reference to incorporate into their strategy.
- Identifies trends and predictive patterns: The actual outcome is never certain, but technical patterns have a history of predicting the most likely scenarios for price movements. These statistical probabilities can improve a trader's odds of success, especially when combining multiple tools and fundamental analysis.
- Intuitive visual cues: The visual nature of technical analysis makes it accessible to beginners. After plotting trendlines, moving averages, and indicators like RSI, traders quickly gain valuable, easy-to-read insights into a cryptocurrency's performance.
- Pinpoints price levels: One of the strengths of technical analysis is identifying entry and exit points. By visualizing support zones on the low end and resistance at the top, traders can better define their risk-to-reward profile and set take-profit and stop-loss orders.
- Data-driven approach: While crypto price charts may seem “noisy,” focusing on candlesticks helps traders cut through the noise. By analyzing concrete data like price movements, trading volumes, and historical patterns, traders gain a clear, systematic way to approach the market and make informed decisions.
Limitations of crypto technical analysis
Using technical analysis to observe price patterns can be useful, but it may also lead to overlooking important factors that influence the crypto market. While technical analysis has its strengths, especially for short-term trading, it’s not without limitations:
- Subjective interpretation: Even though technical analysis relies on raw price data, analysts can interpret the same data differently. Varying timeframes and personal biases can lead two traders to draw completely different conclusions from identical price patterns.
- Overlooks external factors: A narrow focus on charts can cause technical analysts to miss broader market influences. Factors like macroeconomic news, shifts in market sentiment, or new crypto regulations are often not accounted for when solely relying on charting data.
- Relies on history-matching predictive tools: While past price performance can reveal trends, there's no guarantee that history will repeat itself. Technical analysis depends on the assumption that previous patterns will play out again, which may not always be the case.
- Short-term focus: Some long-term investors use technical analysis to evaluate their positions, but these indicators are more commonly associated with short-term trades. Those holding crypto for years rather than days or weeks may find less value in relying heavily on detailed technical analysis.
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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.