There’s no bigger rivalry in the world when it comes to trading cryptos.
Bigger than the Mongeguets and Capulets. Bigger than Ali vs Fraser, Liverpool vs Manchester United, and Packers vs Bears… Combined
It’s as contentious as Republicans vs Democrats.
Or perhaps in economic terms, bigger than the rivalry between Hayek and Keynes.
This is the rivalry between fundamental and technical investors.
In one corner we have the fundamental investors. They say you must look at a crypto’s future use cases, adoption, tokenomics, and derive a value based on these factors. And they say technical analysis is just looking at a bunch of lines on a chart.
In the other corner we have technical analysts who say all the publicly known information is already reflected in the current price. So you should look at price action to give you clues towards future movements.
Most people pick a side and stick with it. There’s no changing.
But we’re not “most people” here at Genesis… We combine the two styles when trading cryptos. We’ll talk about that in future articles, but today let’s focus on the basics of these two investing styles.
Fundamental Investing
It’s called fundamental investing because this is investing. It’s a buy-and-hold approach.
The famous value stock investor, Benjamin Graham said, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
The same applies to trading cryptos. Short-term buying and selling can push the prices of cryptos to irrational highs and lows. But in the long-term it’s the number of users that matters, the use cases for the crypto, and the tokenomics that matter. (You can read more about tokens, here)
Anyone who saw that Ethereum would become the dominant smart contract network back in 2016 and bought ETH, is up thousands of percent right now. And is likely a wealthy person. No trading was needed. These people just bought at $0.XX in 2016 and continued holding.
Sounds easy… But they probably did a lot of homework on the way to remain confident in their position.
The first thing fundamentalists likely read was the Ethereum white paper. The white paper is the inaugural paper of the crypto which describes the initial “business plan.” This paper details the technology behind the crypto, the problems it’s addressing, and the tokenomics of the crypto.
And to keep updated, a fundamental investor keeps up on the news for each crypto they are invested in. These aren’t your traditional news sources… Large publications like the Wall Street Journal, Reuters, and Bloomberg aren’t situated to handle all the intricacies of the cryptocurrency market…
Crypto analysts get their information from websites like Medium which lets projects contribute updates directly. And the best source for breaking news is Twitter. And for those that really want to get deep in the weeds and have contact with the development teams, they join each individual project’s Discord room.
We could write a book on the fundamentals of crypto… Which we plan to write someday. But for now these are the basics.
Technical Analysis
Technical analysis is just about the complete opposite of fundamental analysis. Many technicians completely ignore the news… They wear their ignorance of the fundamentals of their company with a badge of pride.
All these technicians need is to look at past price action in the charts. From there these people look for repeatable patterns that tend to precede a large move.
Technicians will enter a position when the technicals flash a buy signal. And, they typically have an exit strategy. It can either be a profit target or a price level where they pull the ripcord and exit for a slight loss.
Technical analysis is typically used for trading cryptos… Either day trading or swing trading (holding for several days or weeks).
One great charting website is TradingView. This has the best charts for trading cryptos than any site we have found. Here you can get charts of the prices down to the 1-second charts (not that I recommend using charts with that short of a timeframe… but it’s there).
And then it has over 100 built in technical indicators… As well as a whole library of custom made indicators by users of the platform.
You can play with these indicators if you want. But we like to keep it simple. We like to use the same indicators that everyone else uses… Because in a way, technical analysis is a self-fulfilling prophecy. It works because people think it works… So they buy at the levels these indicators tell them to buy.
The best ones we’ve found are to use are moving averages, RSI, and MACD. (We’ll do a deep dive into these in a separate post) When signals from these indicators align and say “buy” it’s often a profitable opportunity.
Now, it’s not quite that simple. The crowd uses different technicals and price levels for each different security. Don’t worry - stick with us and we’ll teach you how to do this work on your own.
With Our Powers Combined...
These are the differences between fundamental and technical investing. And some people just stick to one side of the debate.
However, we like to stack the odds in our favor here at Genesis.
To do that, we often find the companies where we like the fundamental outlook. And then we’ll use technical analysis to find our entry. By combining these we can be assured we will buy only the best companies at the best times. That’s how you beat the market.
