Beginner’s Guide to Reading Cryptocurrency Charts
Regardless of whether you already have some cryptocurrency in your wallet or you’re planning to buy some, chances are that you will want to know how much these virtual coins are really worth in the standard currencies. Also, you’d probably be interested in knowing when it’s the good time to sell, and when it’s better to hold (or hodl!) your cryptocurrency of choice. This is where the interpretation of cryptocurrency charts comes in.
Let’s get over the basics of reading the most known cryptocurrency charts, so it will be much clearer even to those who had never been engaged in digital currency trading.
A simple line chart
This is the most basic chart that illustrates the progression of a coin value over time. You will often see this kind of a chart with multiple lines representing various other information besides the price. Another feature is an option to have an overview of coin’s performance for a month, a week, a day, or even in the last hour (which is useful due to the high volatility of cryptocurrencies). These simple linear graphics are good for a general insight into the price over time.
As shown in the picture above, you can use the “zoom” feature in the top left corner to track the performance for a desired period of time. The green line shows the price in euros, and below that, you can track the volume, which represents the amount traded — in other words, how many people buy and sell the cryptocurrency over time.
Sometimes, the line graph illustrates other measures, such as market cap, and it is used on popular tracking sites like Coinmarketcap. That’s why it is important to understand the terms: the market cap represents the amount of fiat money (EUR, USD) invested into a cryptocurrency. It is determined by multiplying price and circulating supply — this measure is very useful in determining in which currency should one invest. Bitcoin is dominant in this sense: its market cap is around 37% of the total value of all cryptocurrencies.
The price is determined by various factors such as scarcity, utility, supply and demand for a particular cryptocurrency. The circulating supply is the total number of coins on the market. Sometimes you will also find numbers displayed in percents that represent the change in price. The charts allow filtering of all these aspects in relation to different time periods, as shown below:
The candlestick chart
When you start exploring the cryptomarket, it’s inevitable that you will encounter the so-called candlestick chart. It is intended for more advanced traders, but it really isn’t that hard to interpret it. This kind of chart generally displays things like opening price, closing price, the lowest and the highest price over the desired time period, as well as the volume and the market cap.
Each candle displays the opening price at its bottom, and the closing price at the top. The “wickers”, or the lines above and below each candle indicate the lowest and highest price during the selected time period.
Another feature is the color of the candle. It indicates whether the closing price was higher than the opening price (usually represented in green) or lower than the opening price (in most cases represented in red). Green candles are called “up-bars”, and red ones are known as “down-bars.”
Where to start
There are many tracking sites such as the above mentioned Coinmarketcap, Coincodex, Cryptocompare and the like. When it comes to exchange services, there are Binance, Coinbase, CEX.IO and many others, and their charts are generally intended for more advanced users.
Good news for all those who are just about to start trading cryptocurrencies is that the first user-friendly service, Kriptomat, will launch in the following months. This service is designed to allow a fast, simple and secure purchase of cryptocurrencies (as well as their tracking) even by those who have never dealt with it before. Another advantage of the service is that it will be localized; it will provide services in more than 20 European languages.
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