ETH: BEGINNER FRIENDLY ✅ Methods for Predicting Ahead
For those who have been following me here for the past three years, you'll know that I usually never miss an opportunity at a April Fool's prank. However, today's post is NOT one of them. Instead, I'm going to take a turn and do a post that may be of real value to many investors and speculators at this point in the market cycle.
We'll specifically use ETH for this example but these methods can be used across ALL MARKETS.
Understanding the crypto/stock/forex markets can feel like stepping into a vast ocean of numbers, trends, and predictions. As an investor, you might wonder which pricing information is truly crucial: is it the current price or the future selling price? Interestingly, many investors look beyond these immediate numbers and delve into historical pricing data to guide their decisions. But does recent pricing history actually provide reliable insight into future market movements?
Let's explore four perspectives on this topic and dive into the academic research supporting each viewpoint.
❕1. Momentum: Riding the Wave
Picture yourself on a surfboard catching a wave. Momentum in the stock market is somewhat similar - it's about riding the wave of market trends without fighting against them. Think of it as the market's way of saying, "Go with the flow!" Behavioral finance tells us that investors tend to flock towards rising stocks out of fear of missing out or driven by greed.
Academic studies, like the one by Narasimhan Jegadeesh and Sheridan Titman in 1993, suggest that stocks which have performed well in recent months are likely to continue outperforming in the short term. However, this momentum effect seems to reverse over longer periods, hinting at something called mean reversion.
❕2. Mean Reversion: Finding Balance
Experienced investors often preach the gospel of mean reversion - the idea that over time, markets tend to return to an average value. This phenomenon isn't limited to stocks; it can be observed in various economic indicators like GDP growth or interest rates. While some studies support mean reversion in certain datasets, it's not a universal truth. It might take years, even decades, for these subtle shifts to become apparent.
❕3. Wyckoff Method : Planning WAY ahead
The Wyckoff Method is a technical analysis approach to trading in financial markets, particularly stocks. Developed by Richard D. Wyckoff in the early 20th century, it focuses on understanding the intentions of large institutional players, such as smart money, through the analysis of price and volume.
The method emphasizes the principles of supply and demand dynamics, as well as market sentiment, to identify potential trends and trading opportunities. Traders using the Wyckoff Method typically study price charts, volume patterns, and market phases to make informed decisions about when to buy or sell securities. Overall, it aims to provide a framework for interpreting market activity and making more effective trading decisions.
ETH is clearly in profit release phase atm:
❕4. The Search for Value: Digging for Diamonds
Value investors are like treasure hunters scouring the market for undervalued gems. But this method also accounts for knowing when the price is over- or under valued at its current level.
Valuation Metrics include:
Market Capitalization (Market Cap): Compares a crypto's total value (price x circulating supply) to similar projects. A high Market Cap relative to peers might indicate overvaluation.
Network Value to Transaction (NVT) Ratio: Divides Market Cap by daily transaction volume. A high NVT suggests potential overvaluation, while a low NVT might hint at undervaluation.
Both ETH (436 at time of writing) and BTC (417 at time of writing) have a relatively high NVT ratio, which could be an indication of overvaluation.
❕Long-Term vs. Short-Term Investing:
Investors should consider their investment goals and time horizons when formulating strategies. Long-term investing typically involves buying and holding assets for an extended period, while short-term investing focuses on capitalizing on immediate market movements. Each approach has its advantages and risks, depending on individual circumstances and preferences.
The long and short of the matter here is buying low and selling high.
Two methods for TECHNICAL PRICE PREDICTION:
1) Fibonacci
Fibonacci can be helpful to speculate future price targets by using it on a macro scale:
2) Logarithmic Analysis
Find more information on ETH LOG here:
We'll specifically use ETH for this example but these methods can be used across ALL MARKETS.
Understanding the crypto/stock/forex markets can feel like stepping into a vast ocean of numbers, trends, and predictions. As an investor, you might wonder which pricing information is truly crucial: is it the current price or the future selling price? Interestingly, many investors look beyond these immediate numbers and delve into historical pricing data to guide their decisions. But does recent pricing history actually provide reliable insight into future market movements?
Let's explore four perspectives on this topic and dive into the academic research supporting each viewpoint.
❕1. Momentum: Riding the Wave
Picture yourself on a surfboard catching a wave. Momentum in the stock market is somewhat similar - it's about riding the wave of market trends without fighting against them. Think of it as the market's way of saying, "Go with the flow!" Behavioral finance tells us that investors tend to flock towards rising stocks out of fear of missing out or driven by greed.
Academic studies, like the one by Narasimhan Jegadeesh and Sheridan Titman in 1993, suggest that stocks which have performed well in recent months are likely to continue outperforming in the short term. However, this momentum effect seems to reverse over longer periods, hinting at something called mean reversion.
❕2. Mean Reversion: Finding Balance
Experienced investors often preach the gospel of mean reversion - the idea that over time, markets tend to return to an average value. This phenomenon isn't limited to stocks; it can be observed in various economic indicators like GDP growth or interest rates. While some studies support mean reversion in certain datasets, it's not a universal truth. It might take years, even decades, for these subtle shifts to become apparent.
❕3. Wyckoff Method : Planning WAY ahead
The Wyckoff Method is a technical analysis approach to trading in financial markets, particularly stocks. Developed by Richard D. Wyckoff in the early 20th century, it focuses on understanding the intentions of large institutional players, such as smart money, through the analysis of price and volume.
The method emphasizes the principles of supply and demand dynamics, as well as market sentiment, to identify potential trends and trading opportunities. Traders using the Wyckoff Method typically study price charts, volume patterns, and market phases to make informed decisions about when to buy or sell securities. Overall, it aims to provide a framework for interpreting market activity and making more effective trading decisions.
ETH is clearly in profit release phase atm:
❕4. The Search for Value: Digging for Diamonds
Value investors are like treasure hunters scouring the market for undervalued gems. But this method also accounts for knowing when the price is over- or under valued at its current level.
Valuation Metrics include:
Market Capitalization (Market Cap): Compares a crypto's total value (price x circulating supply) to similar projects. A high Market Cap relative to peers might indicate overvaluation.
Network Value to Transaction (NVT) Ratio: Divides Market Cap by daily transaction volume. A high NVT suggests potential overvaluation, while a low NVT might hint at undervaluation.
Both ETH (436 at time of writing) and BTC (417 at time of writing) have a relatively high NVT ratio, which could be an indication of overvaluation.
❕Long-Term vs. Short-Term Investing:
Investors should consider their investment goals and time horizons when formulating strategies. Long-term investing typically involves buying and holding assets for an extended period, while short-term investing focuses on capitalizing on immediate market movements. Each approach has its advantages and risks, depending on individual circumstances and preferences.
The long and short of the matter here is buying low and selling high.
Two methods for TECHNICAL PRICE PREDICTION:
1) Fibonacci
Fibonacci can be helpful to speculate future price targets by using it on a macro scale:
2) Logarithmic Analysis
Find more information on ETH LOG here:
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Cryptocheck Website
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SoftQuant Website
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