Bitcoin is a very volatile cryptocurrency whose market trajectory and short-term prices can be very hard to predict since they fluctuate a lot. But even though it is tough to predict Bitcoin’s prices, you can surely speculate its long-term trends with the right tools.
Here are 5 free Bitcoin indicators (with 3 bonus ones) that you can use as a crypto investor:
1. Moving Averages (MA)
There are several crypto charts available on exchanges and platforms like tradingview.com. One of these charts includes candle charts which are used to look at the overall trend of price developments.
For instance, here, the 200 MA and the 50 MA (Moving averages for 200 and 50 days, the red and the green lines in the Bitcoin candle chart above) are the two indicators present in this example.
When the price of Bitcoin is below the 50-day MA, it is often a bearish sign.
2. Stock To Flow Model (S2F)
This is a well-recognized model developed by PlanB that uses Bitcoin’s scarcity to predict its value. For the above-provided cycle, the stock-to-flow model predicts a BTC price of over $100.
Like silver or gold, Bitcoin is a scarce object, but it is the first digital scarce object that the world has ever seen, which can be sent all over the world using the internet. This digital scarcity surely has value, and this value can be quantified using the stock-to-flow model.
So far, this model by PlanB has not yet been invalidated. Although one should not make choices and decisions based on a single indicator, the stock-to-flow model provides a useful insight into Bitcoin’s price movements.
3. Bitcoin Greed and Fear Index
One of the most important things that any successful investor needs to know is the market sentiment in order to follow the right path.
By integrating the Fear and Greed Index with the chronological Bitcoin price movements, you can make vital decisions such as holding, accumulating, or making a profit.
There exist several ‘Greed and Fear’ indices that have been built by different parties, for instance, btctools.io and alternative.me. They offer more or less the same calculation methods in order to understand the current market sentiment for Bitcoin’s price.
4. Exchange Reserve
This free indicator for Bitcoin can be found on cryptoquant.com, which shows how much bitcoin is being held in exchange wallets.
When the exchange reserve is low in the graph, it shows that investors are transferring their bitcoin out from exchanges, which means they’re planning on holding their BTC. This, in turn, generally indicates a price increase.
5. Bitcoin Relative Strength Index
Same as the Stock-to-flow model, this model has also been developed by PlanB, and you can check a live chart here.
In general and as mentioned in the website, when you look at the RSI axis on the right side of the Bitcoin Relative Strength Index, a high score (usually equal to or more than 70) indicates that Bitcoin is being overbought. In contrast, a Bitcoin’s price movements worldwide low score (equal to or less than 30) indicates that Bitcoin is being oversold.
Three Bonus Tools for Bitcoin Investors:
6. SSR (Stable Coin Supply Ratio)
SSR is a ratio that is defined by the overall market capitalization of Bitcoin divided by the total market capitalization of all stablecoins. When this ratio is low, it tells us that there is a bullish sentiment.
This is because the elevated supply of stablecoins means that there is more demand for Bitcoin. On the other hand, a higher ratio indicates a more bearish sentiment which is due to the low supply of stablecoins, thereby making fewer people buy Bitcoin.
7. On-Chain Indicators
On-Chain data indicators aim at extracting and examining the huge amount of available information available in public blockchain transactions such as Bitcoin transactions to facilitate better decision-making for investors.
Cryptoquant and Glassnode both provide several useful on-chain crypto indicators on their platforms. In Cryptoquant, you can view and use such indicators as NUPL (Net Unrealized Profit and Loss) and LTH-SOPR (Long-Term Holder Spent Output Profit Ratio) similar to what Glassnode publishes except with a time lag for unpaid users.
In Glassnode, you can avail yourself of a lot of useful indicators as a paid member such as Long-term holder Net Position Change, Number of Active Entities, Long-term Holder SPOR, etc.
8. Short Liquidations
This particular indicator provides us insight into whether a sudden BTC price increase is likely to occur due to investors buying back when their short positions get liquidated. Some free sources offering useful data for liquidations are Cryptoquant.com and Bybt.com.
There are many other free Bitcoin indicators that you can use to invest and trade Bitcoin in the crypto market, and you should always use the ones that work the best for you.
Regardless, always remember that no matter which models or indicators you use, never just rely on one or two. Always mix and match the indicators and evaluate them at the same time.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.