Technical analysis for trading?

The technical analysis of cryptocurrency trading is, in my opinion, the closest thing to a homeopathic medicine or placebo effect. They simply convince the user that it works, but it is only a psychological effect.

If you explore social networks you will find endless trading experts explaining the details of the graphs and how to interpret them. However, day trading, intraday trading and scalping are more like a betting system where those who use technical analysis delude themselves into believing that they are doing science.

Make no mistake, with technical analysis, in the long term, projections can be made based on the past behavior of the value of cryptos. In this time frame it is more like what is done in meteorology with weather forecasting. But from there to assume these as an effective strategy applied to a temporary space of minutes or hours is at least irrational.

It takes more than just looking at the past to be able to give the best possible prediction of the future. Unfortunately, speculation, that product of human greed to earn more money faster and with less effort, has led to volatility being the order of the day in the case of cryptos.

However, despite the short existence of cryptocurrencies (Bitcoin is barely 13 years old), the behavior of the variation in their value has been getting closer and closer to that of stocks and stock market products.

This is not only due to the incorporation of traditional investors into the cryptocurrency market and its derivatives, but also because human beings, being social, tend to adopt herd behaviors. Giving as a result that when there are signs of changes in the economic, political and social context, prices move in correspondence to whether they are positive or negative forecasts.

Let's look at some clear examples of this new behavior based on real-world cues:

China and its bans on Bitcoin: when the second economic power in the world banned Bitcoin, the price of cryptocurrencies in general fell. Obviously this happened due to the fear felt by investors, however, the decentralization of Bitcoin caused it to recover its values ​​over time. China has continued to reaffirm the bans on the use of Bitcoin, although it no longer has a significant effect on the value of cryptocurrencies.

Adoption and then abandonment of Bitcoin by Tesla: When the most recognized company in the world in the manufacture and sale of electric cars began to accept Bitcoin as a means of payment, the impact of the news was general. The price of BTC rose sharply and then crashed when not only did Bitcoin's acceptance for sales stop, but company CEO Elon Musk (wrongly) accused Bitcoin of being ungreen.

The FED and its interest rate: although it has already recovered, or at least stabilized, after the increase in interest rates by the Federal Reserve of the United States of America, the winter of cryptocurrencies worsened, collapsing 20%.

Elon Musk and Dogecoin: This is a case where the Dogecoin currency could be defined in two eras, before and after Elon Musk. The reason is obvious, before it began to be mentioned almost daily by the tycoon, the value of this memecoin was barely $0.002. Although it is far from its ATH of almost 0.7 dollars, it was only enough that after the purchase of Twitter by Elon Musk the rumor spread or the hope that it would be integrated as a currency on this platform for it to double its price since the 0.06 to 0.12 dollars.

Of course, these are just a few examples of the influences of political, economic and social situations on the value of cryptocurrencies. But it is key evidence that the same factors affecting the stock market are now affecting the crypto market.

As Bitcoin and some of the main altcoins begin to be adopted and used more and more as a currency of exchange and not only as a store of value, the effect of these types of influences, and therefore volatility, will progressively decrease.

Based on this analysis, it is my opinion that technical analysis for day trading, day trading and scalping is a method of justifying the irrational act of betting on the up or down. This explains the fact that as many different scenarios are interpreted from the same chart as traders analyze it.

Having said the above, everyone is free to draw their buying and selling strategies in the way they think will best achieve their goals.

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