How To Read Cryptocurrency Charts

Crypto charts and all the data that they offer may be confusing and complex at first glance, especially for new investors. But they present information in a systematic way to help traders get an overview of how a cryptocurrency has performed over a specific period of time. So crypto charts can help you understand key things about a specific coin and how it’s performed.

By understanding the basics of how to read a crypto chart, new traders can study the price action on a given crypto coin. Here are the key basics on reading crypto charts for beginners.

How to read a crypto chart

A crypto chart may differ from platform to platform, but they’re all generally providing the same kind of information. You can find them on public sites such as Yahoo Finance, crypto-dedicated sites such as CoinMarketCap or on the best brokerage accounts for trading crypto.

The example below of a Bitcoin (BTC) chart comes from CoinMarketCap. This chart, which is not live, is for illustrative purposes only and depicts Bitcoin’s various values from a single moment in time that has passed.

The chart

A crypto chart provides one of the easiest ways to get an objective look at how a cryptocurrency has performed over time. The crypto’s price is shown on the vertical axis, while the time period is shown on the horizontal axis, so you can quickly see the price trend over time. You can also click a button to change the time period you’re analyzing – here one day, seven days, one month, one year or all time. The price history for Bitcoin is one of the best for crypto traders.

The large, bolded number in the upper left is the current price, the price of the last recorded trade. The green number just to the right shows the price performance over the prior year. At this moment, Bitcoin was up nearly 109 percent over the same point a year ago.

Since cryptocurrency is driven entirely by sentiment — because it’s not based on any underlying asset or cash flow of a business — it’s important to pay attention to the crypto’s price action. The coin’s price action is one way to find the next great cryptocurrency, since a strong price move is one of the best signs that a coin is getting a lot of attention and positive sentiment.

So a long-term price chart gives you the best idea of how the cryptocurrency has performed and whether it’s kept traders’ attention and positive sentiment, or it’s been a brief “flash in the pan.” Cryptocurrencies that do well over time need to keep their positive sentiment.

Crypto chart basics to know

A good crypto chart also provides a lot of other data that can be useful to you as you’re learning how to trade cryptocurrency. So analyzing what the chart’s data means can help you make a good decision about whether to trade it. Here are some of the key terms in a crypto chart.

• Market capitalization: The market capitalization, or market cap, is the total value of a crypto’s circulating supply, so it would be the cost to buy all the existing coins. In other words, it’s the circulating supply multiplied by the current price of the coin.
• Volume: The volume shows the dollar value of shares that have been traded over the preceding 24 hours. It gives you an idea of how popular the coin is. The most popular cryptocurrencies are trading billions of dollars in volume every day.
• Volume/market cap: This ratio tells you how much of a coin’s total value has been traded over the last 24 hours. This number may spike if a special event affects the crypto or traders decide to rush in and buy or sell for whatever reason.
• Max supply: The max supply shows the maximum number of coins that can be issued for this cryptocurrency. Bitcoin famously has a max supply of 21 million, while the second-most popular crypto, Ethereum, and many others have no max supply.
• Total supply: Total supply is the total number of coins created minus the number of coins that have been burned (i.e., destroyed). These issues are covered in a coin’s tokenomics, which traders should understand fully before investing.
• Fully diluted value (FDV): A coin’s fully diluted value is the total value of all potential supply. So in Bitcoin’s case, it’s 21 million coins times the current crypto price.
• Low/high: A bit further down on the chart (off-screen) are the high and low prices over the last 24 hours. These figures give you an idea of how the coin has traded recently.
• All-time low/high: These figures tell you the highest and lowest recorded price that the crypto has ever traded at. An otherwise popular crypto, such as Bitcoin, that’s trading well below its all-time high may be apt to rebound if sentiment or other factors change.
• White paper: A cryptocurrency’s white paper explains how the coin operates, in particular the coin’s tokenomics, how it’s governed, how money raised for the coin will be spent. It gives a detailed overview of what crypto traders should know about the coin.
• Website: This chart helpfully provides a link right to the cryptocurrency’s webpage, where you may find other detailed information about the coin, who sponsors it, what its goals are and what the founders plan for the future.

It’s important to understand that — unlike stocks, which can be valued on traditional valuation metrics because they have earnings — crypto cannot be valued since it’s based on sentiment. So, investors who read stock charts can get a ton of valuation information, traders in crypto simply don’t have the ability to get valuation info because crypto doesn’t generate cash flow.

However, that doesn’t stop forecasters from producing a range of seemingly ever higher price predictions for Bitcoin and other cryptocurrencies.

Bottom line

Crypto charts can be useful tools to get a snapshot view of how a cryptocurrency has traded, and the best charts offer a ton of other info, too, such as links to a coin’s white paper. So a good chart can help you quickly get up to speed on a crypto and understand if there’s an opportunity.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.