In the last decade, cryptocurrencies have become the most talked-about financial instrument for trading and investment purposes. However, despite their immense popularity, predicting the price of any coin isn’t far off from rocket science!

Fortunately, we have indicators to make our lives a little easier. Yet, as we know, experts group indicators into technical, fundamental, and sentiment.

In virtually all financial markets, technical tools are viewed as inferior when predicting movements. However, this isn’t to say they are entirely useless.

Contrarily, fundamental and sentiment indicators are perceived as superior and tend to change before the prices on our charts, meaning they can often provide preceding signals.

However, the main challenge is there are many tools in this regard for cryptocurrencies, leading to potential ‘analysis paralysis.’

Nonetheless, this article will cover the best six crypto trading indicators, which will be a combination of technical, fundamental, and sentiment tools. Needless to say, it’s worth noting that this list can never be an exhaustive guide. 

Since cryptocurrencies are still a relatively new asset class, more resources will inevitably come up, creating countless analytical possibilities.

Crypto Fear & Greed Index

FGI index from Alternative.me with historical values

The Crypto Fear & Greed Index (FGI) is the primary sentiment indicator for cryptocurrencies with pretty compelling insights. The tool is inspired by CNNMoney’s Fear & Greed Index.

While it’s based mainly on Bitcoin, the results are pretty influential across most cryptocurrencies, given the overarching dominance of BTC. The FGI is based on the concept that investors constantly move between emotions of fear and greed. 

Fear causes traders to sell a digital asset when it may be undervalued (presenting buying opportunities), while greed results in them selling a coin that’s probably overvalued (offering selling opportunities).

The index is updated daily and shows readings between 0-100. Scores from 0-50 represent fear (with those from 25 and below considered ‘extreme’ fear), while scores from 50-100 suggest greed (with those from 75 and above perceived as ‘extreme’ greed).

FGI chart with 7-day, 1-month, 3-month, 1-year, and max settings

The most popular version of this index is published by Alternative.me. Furthermore, the site offers a graph of FGI readings over the past week, month, three months, and year (as in the image above).

IntoTheBlock’s Whales Ownership Indicator

The Whales Indicator for Bitcoin on IntoTheBlock

IntoTheBlock is a machine learning-based data analytics platform for a wide range of crypto assets. Among the tools on their site is the Whales Ownership Indicator.

This resource simply shows the concentration of whales, individuals who hold a high amount of tokens in a blockchain network. The site considers a whale as an address having over 1% of a coin’s circulating supply.

IntoTheBlock divides the data further into low and high activity, the latter of which is the most significant part. Looking at the information on whales helps investors understand the likelihood of a coin’s price being manipulated through the ‘sell wall’ effect and FOMO.

A higher than average number of whales could lead to a massive sell-off or an unexpected rally in the markets. The only problem with this tool is that users only have a 7-day free trial before upgrading to a paid subscription.

TradingView’s Bitcoin Market Cap Dominance

TradingView’s Bitcoin market cap dominance chart

Bitcoin Dominance is the concept referring to a measurement of the total crypto market cap versus that of Bitcoin.

The simplest method is using the chart calculated by TradingView (under the ticker BTC.D), showing Bitcoin’s market cap dominance in percentages. You can analyze this information as you would in any other market using your preferred technical indicators.

Understanding Bitcoin dominance helps with anticipating the likelihood of altcoins (all other coins except BTC) trending higher or lower. Generally, if BItcoin’s market cap goes down, it’s considered ‘alt season’ (the bull market for altcoins) and vice versa.

Moving Averages

A TradingView chart with a moving average

The Moving Average is the cornerstone for most technical indicators in virtually all financial assets. This tool simply shows a consistently-updated average over a defined period as a line.

Moving Averages (MAs) are one of the no-frills methods of identifying trends at a glance. When the price is below the MAs, the market is considered a bearish phase; conversely, when the price is above the MAs, the market is deemed to be bullish.

Certain periods have become the most commonly used among Moving Average proponents, and these include 5, 10, 20 (for short-term trends), 50, 100, and 200 (for long-term trends).

Another technique with Moving Averages is the crossover, which uses two MAs of different period lengths as an entry trigger into a trend.

Relative Strength Index

A TradingView chart with the RSI showing divergence and oversold/overbought

The RSI (Relative Strength Index) is another popular technical indicator. It was developed by the late J. Welles Wilder back in 1978. While moving averages deal with trends, the RSI was explicitly designed for discerning momentum.

It utilizes a 14-day moving average (with an adjustable period) as a line graph oscillating between 0 and 100. The main job of the RSI is displaying overbought (readings above 70) and oversold (readings below 30) conditions. 

This information provides analysts with the momentum strength and the possibility of a market retracing. The other function of the RSI is showing divergence, which is a relatively reliable sign of a reversal when combined with other factors.

Average True Range

A TradingView chart with a moving average

The ATR (Average True Range) is another of Wilder’s well-known inventions and also consists of a Moving Average presented as a line graph. Its purpose is to show volatility over a certain number of days (typically 14, though adjustable) for a particular time frame.

While it’s not an indicator necessarily for generating signals, understanding how many pips a market has moved within a particular period is beneficial for setting profit and stop loss distances.

Another interesting technique used by some traders is identifying support and resistance with the ATR. Here, one compares past ATR readings at a certain level against the present ATR reading to forecast where a market may likely reverse.

Curtain thoughts

When most traders think of indicators, they typically refer to technical tools. However, cryptocurrencies are even more dynamic than traditional markets. This means it’s probably a wise decision to rely on other resources aside from those on your chart.

Having a good balance of technical, fundamental, and sentiment analysis will help one make much more informed trading decisions with a higher probability of success.