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The reason why most people in the crypto market use technical analysis instead of fundamental analysis.

1. Less public information in the crypto market.

The cryptocurrency market has only been ten years. Compare to the history of stocks market, cryptocurrency market is still a new market. Hence, there is only less public information in the cryptos market. Even now many investors don’t know what kind of fundamental information is useful in cryptocurrency market. In addition, the current fundamental analysis methods of cryptocurrencies are not developed well as the stock or bond markets. However, fundamental analysis will become more progressive with the evolution of time and the history of cryptocurrency.

2. It’s prone to trading signals in the crypto market.

The volatility of the cryptocurrency market is greater than that of general financial assets, so it is suitable for short and medium term transactions. According to this characteristic, in cryptocurrency market, technical analysis is more effective than fundamental analysis.

3. The crypto market is dominated by retail investors

Fundamental analysis is usually done from a macro to micro perspective. It’s in contrast to technical analysis, which forecasts the direction of prices through an analysis of historical market data such as price and volume. If you are doing fundamental analysis, from the broader economy to the company details you have to consider. It may not easy for the novice, so so most retail investors prefer to use technical analysis as their main investment strategy.

What are cons of using technical analysis in  the crypto market?

1. Insufficient transaction information

Like fundamental analysis, the historical data of the cryptocurrency market is not enough so technical indicators may not be correct. Therefore, users have to enhance their abilities and adjust trading strategies according to the situation. 

2.Technical analysis cannot reflect the true value

The cryptocurrency is a 24/7 market, and there is no upper and lower limit on crypts price. Technical analysis will be inaccurate when the event occurs. Since technical analysis forecasts the direction of prices only through the historical price and volume, investors cannot know the true value of assets. Hence, technical analysis needs to be combined with a stop loss strategy. You are better to implement stop loss strictly when the market trend is unexpected. 

For investors, cryptocurrency is different from traditional finance, like stocks, forex, and gold, it’s a new type of investment asset. If you want to invest in this market, you need to take time to study relevant knowledge behind it, and read more resource articles to enrich your understanding of cryptocurrency.