Is technical analysis negatively affecting cryptocurrencies?

[Embeco]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any. Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

What is your view on this?

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[nicster551]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any. Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

What is your view on this?

Yes, sometimes Technical Analysis doesn't work on crypto because news and manipulation always do something about the price of crypto.

[odolvlobo]

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.
What is your view on this?

It seems that your complaint is more about speculation causing volatility than against TA itself. I agree that speculation and volatility are problems, but I take a long term view. I use Bitcoin now as much as I can, regardless of the price, and I will continue to do so in the future. All of these price fluctuations are ultimately just minor bumps in the road in the face of a long term adoption juggernaut. I am not concerned.

BTW, I agree. TA is nothing more than astrology for traders.

[dothebeats]

Speculation overall seems to be affecting cryptocurrencies if the general goal is to use them as an effective currency, since volatility will always be present with or without TA methods as long as even the slightest speculative techniques are applied in crypto to profit. It doesn't hurt the cryptos in any way but rather, help them gain exposure and traction for whatever purpose they may be best at. As a currency though, I don't see any crypto that can be as excellent as fiat in retaining its value and minimizing volatility in price. All cryptos are subject to TA and speculation, so yeah, rant all we want but we can't remove that fact from all cryptos around.

[cfif123]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any. Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

What is your view on this?

Yes, sometimes Technical Analysis doesn't work on crypto because news and manipulation always do something about the price of crypto.

absolutely right because there are so many news that can change crypto like the price, so most of the bad news that comes in, the faster the market will decrease

[The Sceptical Chymist]

BTW, I agree. TA is nothing more than astrology for traders.

Me too, and I've said as much in other threads as well.  TA has always struck me as some kind of financial voodoo science, with people staring at past prices and trying to predict the future.  All the weird terminology TA people use doesn't help, either.  Some of it is just straight-up bizarre.

As far as TA's effect on the market, I don't think there really is any.  Speculation is speculation, and it doesn't matter if speculators are analyzing charts or not.  It's the combined buying and selling of everyone in the market that moves prices.

The fundamental values of traditional assets always strike back, no matter what TA says.

I would agree with this if you were talking about the stock market, where the businesses underlying the stocks actually have a fundamental value that can be analyzed.  The problem in crypto is that there's no way to tell what the "fundamental value" is for any given coin.  Coins have no earnings, they don't pay dividends, and ultimately there's no business behind any of them that lends itself to traditional FA. 

It's actually not surprising that we see so many TA folks around here, because there's not much else to do besides look at charts--but I'm still of the opinion that doing so is basically useless.

[ghermghuda]

Well, it seems TAs are not working even anymore. Even CZ, binance CEO saud it after thia recent usdt FUD pump. He said months of good news and insights into the cryptospace couldn't trigger an uptrend and just a alse news triggered it. Seems market is moving away from predictions and we can all testify to that because this year, many predictions never worked. Some analysts even ended up reducing the target prices.

[kryptqnick]

TA is not affecting markets in any way, most of the market participants are not aware of TA and are not using it.
But most of regular traders are thinking of entries and and exit points , and support zones which are rational and logical and that works, it is not a matter of belief.
Also some patterns are solid with high accuracy, others are less accurate .

When people publish a thread with their TA, people usually respond with positive messages like 'great information', 'useful analysis' etc. People do believe in it and that surely can lead to it becoming our reality, since traders and investors act accordingly. If it is so, however, it makes TA useful for traders, just like bad news on respected news portals mean that a trader should sell the coins rightaway. Not because the news is really important and terrible, but because people will think that others will start panic selling and start it themselves, thus causing negative price predictions to become true. It could certainly help the market if more people made positively oriented TA and people believed in it, thus making it closer to us, even if the methods themselves are useless.

[figmentofmyass]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

you've contradicted yourself. you say there's no proof that it works, then you assert that it works because it's a self-fulfilling prophecy. which one is it?

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any.

there are also fundamentals underlying cryptocurrency that affect supply and demand to the spot market. if there's an existential protocol flaw or a significant network split, don't you think "support" might be broken too?

Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

just because a market is speculative doesn't mean TA reigns supreme. what evidence do you have that TA is responsible for anything at all? this is a common assumption with no basis in fact.

traders (some of whom employ TA, some of whom employ FA, and some of whom are just randomly trading) are just supplying liquidity to the market. if anything, they make it less volatile (by adding liquidity) and therefore less speculative.

[Cryptomilz]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any. Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

What is your view on this?

You're absolutely spot on this one. Even a TA expert I respect so much once told me there are times TA don't work in crypto, and I've seen it happen several times, especially for low priced coins. For me, I believe the fundamentals (news, updates, partnerships, etc.) play a major role in crypto and determines to a very large extent the price movements of individual crypto assets.

[xuan87]

Yeah , sometimes I also wonder how can people predict the movement using the chart, and I come to the conclusion that it actually a psychology of how people will react when they analyse the chart,if a bunch of people stop believe in the chart then TA won't be useful, that is why chart sometimes could be deceiving

[Embeco]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

you've contradicted yourself. you say there's no proof that it works, then you assert that it works because it's a self-fulfilling prophecy. which one is it?

Thank you for your reply, really appreciate that stance!
Regarding your first point: I don't think I have contradicted myself, I may just not have sufficiently explained what I mean: There is no scientific proof, that the underlying principles of TA work for any other reason than the widespread belief that it works, meaning that it is a self-fulfilling prophecy and similar patterns would not form if they were not believed in by a large group of people, making them completely independent of the underlying economics.

This is somewhat of a problem in traditional assets, but it is just a minor nuisance. The fundamental values of traditional assets always strike back, no matter what TA says. Found resistance? Doesn't matter if the underlying value shoots way up due to increasing sales, usage or whatever. Glad a value has some support? Doesn't matter if sales drop to near-zero, the price does not care about support.

At cryptocurrencies, however, those fundamental values don't work as there are rarely any.

there are also fundamentals underlying cryptocurrency that affect supply and demand to the spot market. if there's an existential protocol flaw or a significant network split, don't you think "support" might be broken too?

I absolutely think so. However, those fundamentals are time discrete. I cannot decide to do an analysis of the fundamentals right now, I can just analyze news coming out. That's opposed to traditional markets, where I can analyze fundamentals at any given time. i'm not saying this is bad, but it definitely powers volatility and TA.

Most companies behind cryptocurrencies either have no product that is close to justifying their volume and value. Some of them (Bitcoin amongst them) do not even want to have one. Therefore they are subject to constant influence by those religiously believing in TA, which makes them an object of pure speculation. The fundamental values are "news", no matter the level of reliance.

In my opinion, this holds cryptocurrencies from being a usable and reliable method for everyday transaction use.

just because a market is speculative doesn't mean TA reigns supreme. what evidence do you have that TA is responsible for anything at all? this is a common assumption with no basis in fact.

traders (some of whom employ TA, some of whom employ FA, and some of whom are just randomly trading) are just supplying liquidity to the market. if anything, they make it less volatile (by adding liquidity) and therefore less speculative.

I have no evidence, hence the question in the thread title. For me, it is a question that I am asking myself and would like to get opinions - such as yours - on.
Regarding your last point I just wanted to throw in, that this exact same argument was the favorite argument of High Frequency Traders in traditional markets:
"We are not damaging the market, we are just supplying liquidity".
Turns out that was not the entire truth.

[shiming]

It seems that in the encryption market, graphical analysis is of no use to the market, can not play a reference role, those experts analyze a lot, but sometimes inconsistent with the market, so still rely on their own judgment, do not be misled by others.

[timerland]

Exactly. I like your point about TA being a self fulfilling prophecy, because that's exactly what it is.

It's almost like a pump and dump group. When people think that a prediction is going to right, they are going to buy into it. And the larger the platform that some analysts have, the more likely their predictions they make will

I'd say that anything that is out of the scope of the long term pricing trend is quite irrelevant for bitcoin. There are going to be different market conditions in the very short run that are just completely random and unpredictable, and there are people trying to use TA to cover that. Is it negatively affecting traders, especially inexperienced ones that are blindly believing in it.

[jamids]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

Yes, using technical analysis is like knowing what other people are thinking. It is indeed a self-fulfilling prophecy wherein when the group of people thinks that it will have a support or resistance in that level then it would come true because many of them believe so. After all, technical analysis is studying the previous behavior of the market hoping that it would be the same way in the future. If not, then we have those stop losses to lessen our risks of having bigger losses.

[wahyu wida]

I have to say upfront that I'm no fan of technical analysis, even in traditional asset markets. There are 2 main reasons for this:
1) There is no scientific proof that technical analysis works at all. The only correlation between technical analysis and true market movements is that it is widely believed. And this leads to the next point
2) TA is a self-fulfilling prophecy. If people stopped believing in it, it would stop working right away. If people find new patterns they only start actually working once they get enough traction for other people to believe in them.

Yes, using technical analysis is like knowing what other people are thinking. It is indeed a self-fulfilling prophecy wherein when the group of people thinks that it will have a support or resistance in that level then it would come true because many of them believe so. After all, technical analysis is studying the previous behavior of the market hoping that it would be the same way in the future. If not, then we have those stop losses to lessen our risks of having bigger losses.

Technical analysis helps traders predict trends. of course traders will buy in support area and sell it in resistance area. and i think of course traders will act according to trends and news that occur

[illinest]

What about long term TA? I know traders who only trade on the weekly or monthly time frame, to cut out the short term noise. For instance, bitcoiners who buy the dip based on the "long term trend" are employing TA.

[Keshawn Frye]

In this volatile cryoto market the technical analysis does work like astrology and nothing more. However, this is not the thing that is stopping crypt from being a usable and reliable method for everyday transaction use. In fact there is hardly any relation between these TAs and crypto's use in the daily transactions.

[maculeth]

yes, FUD will make other people anxious and make them participate in the sell panic trend. of course that is negative for crypto.

[St4yInTh3D4rk]

If people stop doing technical analysis then this strategy will no more as you said but we don't have any method to predict the prices of the crypto currencies so people comparing it with the old patterns and it also act same like that some times and the average growth of the cryptos are also following their path so it has negative effect in short term but in long term investment it can be really helpful.