Investors are always looking for indicators to understand or explain the price movement of an asset. While it’s easy to relate a regulatory statement or pending legislation to price movement, it usually doesn’t give the full picture. Some price actions occur due to coincidence or unrelated sheer luck. Bitcoin has shown a wild move this year, dropping from $ 20,000 (around Rs. 15 lakhs) to $ 65,000 (around Rs. 48.5 lakhs) and then collapsing again to less than $ 30,000 (around Rs. 22.4 lakhs). The world’s largest cryptocurrency once again topped $ 60,000, around Rs. 44.8 lakhs).
In the cryptocurrency industry, it is very difficult to time or guess the price of a Bitcoin, for example. However, there are some key metrics that all Bitcoin investors should pay attention to. What are these indicators?
1. Exchange balance
Most of the trading activity takes place on centralized exchanges. Most traders and all speculators keep their coins on the exchange to take advantage of sudden price swings. The amount of Bitcoin on exchanges gives an indication of what large investors think. For example, Bitcoin has flooded exchanges at the fastest rate in its history in recent months. This coin exodus indicates that Bitcoin has shifted from short-term speculators to longer-term holders who are removing the coins from the exchanges. A reversal of this trend would indicate short term selling pressure.
2. Google search interest
A simple but effective way to gauge the general interest in Bitcoin. Usually, new investors and individuals are generally looking for terms like “Bitcoin” and not veterans. Sometimes muted research volume can also indicate institutional investors could be the start of a rally and retailers could join in once price peaks.
3. Bitcoin Treasures
Companies that invest in Bitcoin often have a long-term strategy. As more businesses prepare for cryptocurrency, its use will increase. This will create a domino effect and increase the value of Bitcoin as an asset. Alternatively, if companies start to liquidate their holdings, the price may collapse. Most of the companies that invest in cryptocurrency are public, so their stocks can be easily tracked.
4. Active feeding
The active offer of a cryptocurrency is also an indicator of the “Hodler” mentality. As active supply decreases, Bitcoin holders lean towards hoarding their coins, further reducing the coin’s availability for sale. Despite Bitcoin’s volatility, Bitcoin holders have refused to sell, suggesting that they believe its price will rise further.
5. Regulatory actions
China’s crackdown on Bitcoin mining this year has caused its prices to drop sharply. Additionally, when El Salvador encountered problems deploying Bitcoin as legal tender last month, its price was briefly under pressure. But he recovered quickly and continued to rise. It is prudent to pay attention to regulatory actions like these.