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Want to invest in crypto? Data analytics holds the key
Highlights
- Similar to the broader stock market, crypto investments also require a thorough analysis of multiple factors before making investments.
- Analysis of this massive data can reveal interesting trends that an average investor is highly unlikely to spot and interpret.
- Embracing data analytics will give investors a competitive edge over those who make investment decisions based on intuition and incomplete data.
In this article
Introduction
Cryptocurrencies and NFTs - the new genre of digital investment
Cryptocurrencies and NFTs have witnessed a massive rise in popularity since their advent in 2009. They have emerged as an altogether new genre of digital investment.
CoinMarketCap data reveals that there are currently 10,953 actively traded cryptocurrencies worldwide. The number is expanding at an unprecedented pace. More than 1000 cryptocurrencies made their debut every month between 2020- 21. The sheer number of cryptocurrencies and NFTs in the market today can overwhelm even seasoned crypto investors. A whole new class of Litecoins, Altcoins, Stablecoins, and Memecoins have emerged, leaving investors confused.
The launch of NFTs has only added to this confusion. The market for NFTs grew 20X during the same period. A regular investor cannot meaningfully interpret these sporadically distributed disparate sets of data in real time.
The rising importance of data analytics in crypto investment
Similar to the broader stock market, crypto investments also require a thorough analysis of multiple factors before making investments
For example, investors need to pay close attention to factors like the underlying technology powering the crypto, market cap, price fluctuations, volatility, and pricing history. More importantly, they must consider promoters’ profiles and problem-solving abilities.
Rapid growth and increasing complexity in the crypto space have led to the rise of several AI-enabled data-analytics platforms to make crypto investing simple for investors. Another advantage is they can offer actionable insights after analyzing what’s happening behind the scene, such as whether top crypto holders and ‘whales (Institutional players) are accumulating or dumping them and how smart money is changing hands. Data analytics platforms like ‘Context’ and ‘Nansen’ analyze various wallet transactions to offer insights about metadata.
They can even track social media conversations to gauge people’s sentiments towards a cryptocurrency. This is important as the buzz surrounding a crypto asset can influence its price movement.
Analysis of this massive data can reveal interesting trends that an average investor is highly unlikely to spot and interpret.
Crypto and data analytics
How data analytics can benefit crypto investors and traders
Data analytics tools can help investors in the following ways:
Help identify new investing opportunities
A robust data analytics tool can analyze thousands of cryptocurrencies and NFTs to discover a carefully curated list of investment options to suit investment horizon, return, and risk profile. This way, investors can make a quick investment decision.
Make data-backed decisions
Identifying market trends and patterns is the key to success as a cryptocurrency trader. Real-time data analytics can use chart patterns and trends to offer meaningful insights in real-time to make smarter investing decisions.
Analyze investment risks
A common investor can easily be lured into making wrong investment decisions based on misrepresented facts. For example, launched last year, amid the “dog-coin” surge, Anubis Dao raised $60 million. However, the funds vanished from the project’s liquidity pool the next day. Such scams are rampant in the crypto space. A data analytics platform can prevent new investors from being duped. Analytics tools can also help identify the risks associated with investments.
Predict future trends
A data-analytics tool evaluates hundreds of factors to forecast quickly which crypto or tokens can offer market-beating returns. Investors can refine their portfolios based on the signals.
Conclusion
Cryptocurrency industry can benefit by adopting data analytic techniques
The phenomenal rise in the number of NFTs and cryptocurrencies offers exciting future wealth generation opportunities. Embracing data analytics will give investors a competitive edge over those who make investment decisions based on intuition and incomplete data.
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