DeFi (decentralised finance): what it is in cryptocurrency

What is cryptocurrency in simple terms? Simply put, it is money on the internet, but without physical coins or notes. It takes place digitally and is not controlled by a central bank or government. It sounds futuristic, but it is already a reality. It is changing the whole world, the financial system, the economy, and even everyday life. Let’s see why virtual currencies are so popular now, what is behind them, and how they work.

Why is it important to understand cryptocurrencies? How is our world changing?

Don’t think that cryptocurrencies are a fad, like everything that was once fashionable. It is changing not only the financial sector, but also global economic processes. For example, in 2023, the global cryptocurrency transaction volume was about 5 trillion US dollars. According to statistics, the cryptocurrency market will continue to grow in 2024. Cryptocurrency transactions will account for 10% of global monetary transactions.

The biggest difference between cryptocurrencies and traditional money is decentralization. It doesn’t work through a bank, but through a blockchain: a distributed database. This means that all transactions are transparent, secure, and, most importantly, instantaneous. For example, you can transfer money from one side of the world to the other in a matter of minutes, without the fees that banks charge. And for countries where access to traditional financial institutions is limited, cryptocurrencies are becoming a true revolution.

What is cryptocurrency in simple terms? Let’s analyze the concept.

When people talk about cryptocurrency, most people immediately think of Bitcoin, the first and most popular virtual currency. But in fact, this is just the beginning. Simply put, cryptocurrency is digital money that does not exist in physical form and is not controlled by a central authority. It works through a system called blockchain. This is a chain of data blocks stored on millions of computers around the world.

To understand the concept, imagine that each block is a page in a book. It records all transactions and cannot be deleted or changed. Blockchain is a kind of public ledger of all transactions, accessible to all participants in the network. But this does not mean that the data is public. It is protected by cryptographic algorithms that allow participants to remain anonymous.

How cryptocurrencies work: a look behind the scenes of the technology

To understand the details, it is necessary to know something about the business process itself. Cryptocurrencies are based on blockchain technology. It is not just a database, but a decentralized system without intermediaries. All transactions are recorded in blocks, and blocks are recorded in a chain. They are not generated and verified by a single party, but by thousands of computers.

Each participant (or node) in the network stores a complete copy of all records. It is no longer possible to change or falsify the information. Miners are responsible for verifying transactions: users make sure that the system works and receive a reward in the form of cryptocurrency. Mining is a process in which computers solve complex mathematical problems to verify the accuracy of transactions.

Types of cryptocurrencies: not all money is the same

When we talk about virtual currencies, we usually mean Bitcoin (BTC) or Ethereum (ETH). There are actually many different types. Let’s take a look at the most popular ones:

1. Bitcoin (BTC) is a pioneer in the world of cryptocurrencies. It was created in 2009 by a mysterious creator named Satoshi Nakamoto. It is mainly used as a means of accumulation and investment, although it can also be used for payments.
2. Ethereum (ETH) is a complete platform for creating smart contracts. It allows you to create decentralized applications (dApps) and perform complex operations such as token swaps, all without intermediaries. Many projects operate on Ethereum, including DeFi (decentralized finance).
3. Litecoin (LTC) was developed as a faster and cheaper alternative to Bitcoin and is ideal for micropayments.
4. Ripple (XRP) focuses on bank transfers. It is actively used for international transactions.
5. Stablecoins (like USDT) are pegged to real assets, like the US dollar. This minimizes volatility, making them suitable for settling and storing funds.

How do cryptocurrencies differ from regular money?

Cryptocurrencies are not just money, as everyone knows. Regular dollars and euros are controlled by government institutions and central banks. Unlike cryptocurrencies, they are not dependent on governments or financial regulators. It is not tied to physical assets, but exists exclusively in the digital space.

How do I buy cryptocurrencies? Step-by-step instructions:

1. Select a platform to buy. The most popular crypto exchanges are Binance, Coinbase, and Kraken. You can buy everything from Bitcoin to Ethereum and even more exotic coins.
2. Register on the platform. In order to shop, you will need to register, fill in your details, and confirm your identity.
3. Top up your account. This can be done via bank transfer, credit card, or other cryptocurrencies.
4. Select the cryptocurrency you want to buy. On the platform, you will need to select the currency you want to buy.
5. Make a purchase. Once the money is credited to your account, you can buy virtual currency.
6. Transfer cryptocurrency to your wallet. For security reasons, it is best to store your money in a wallet rather than on an exchange.

Where to safely store cryptocurrency: an overview of the best options

When it comes to storing coins, we distinguish two main types of wallets: hot and cold wallets. Hot: always connected to the network. These options are ideal for people who make frequent transactions, as they allow you to send and receive money instantly.

Cold storage devices, on the other hand, are devices that are physically isolated from the internet. They are considered the safest, as the cryptocurrency is not at risk of being hacked via the network.

Popular cold wallets: Ledger and Trezor. They offer secure encryption and storage of private keys on physical media. For everyday use, trendy formats such as Exodus and Trust Wallet are useful. They are easy to use and support a wide range of cryptocurrencies.

When choosing, always keep the following in mind: the larger the amount, the more secure the storage method should be.

Conclusion

Now that you understand what cryptocurrency is, how it works in short, and how it differs from traditional money, you can take action. The most important thing to remember is that this is not just another financial instrument, but part of a new economy. The sooner you start understanding the process, the sooner you will enter the future.

Technical analysis of cryptocurrencies has long gone beyond charts. Financial strategies in the digital age require accurate and adaptable tools, able to identify patterns in a highly volatile environment. A superficial glance does not reveal the essentials. Only a systematic approach can extract signals and turn them into informed trading decisions.

Why apply technical analysis to cryptocurrencies?

Every price movement in the cryptocurrency market is shaped by a combination of factors, but not randomly. Technical analysis of cryptocurrencies helps build market logic based on past data, mathematical patterns and market psychology.

Platforms with millions of participants generate behavioural cycles. Indicators, levels and shapes form the language in which the market communicates its intentions. The aim of analysis is to identify entry and exit points with a high probability of profit. No fundamental approaches or external events are used. Only the chart, volumes and behaviour of participants.

Tools: how to structure technical analysis of cryptocurrencies

Each statistic is based on a combination of three main areas: levels, indicators and chart patterns. The segments reveal individual facets of price behaviour. Before moving on to specific strategies, it is important to form an analytical framework. This includes

1. Historical candlestick data (OHLC).
2. Market depth and trading volumes.
3. Time frame of analysis: M5 to 1W.
4. Asset volatility.
5. Correlations with indices, fiat or other tokens.

Levels and zones: graphical skeleton

No indicator is a substitute for a high-quality level marker. Technical analysis of cryptocurrencies uses support and resistance levels as the core to assess market reaction.

Working techniques:

1. Horizontal levels by extremes.
2. Mental levels: multiples of 1,000 (e.g. $20,000 for BTC).
3. Consolidation zones: sideways zones with volume accumulation.
4. Dynamic levels: moving averages as resistance/support zones.

Indicators: algorithms in action

A candlestick chart alone does not reveal the trend structure. Technical analysis of cryptocurrencies uses indicators as mathematical complements to the visual picture.

Key patterns:

1. Moving average (MA) – smoothes the chart, determines direction. Simple and exponential versions differ in reaction speed.
2. RSI (Relative Strength Index) – shows overbought/overold. Values above 70 and below 30 give reversal signals.
3. MACD (Moving Average Convergence Divergence) is a trend indicator based on moving averages. Intersections of the lines indicate a phase change in the market.
4. Bollinger Bands: measure volatility. Exits beyond the bands indicate a possible correction or momentum.
5. Volume – confirms movements. Higher volume on a breakout makes the signal more reliable.
6. Stochastic oscillator – estimates the probability of a reversal. Often works in conjunction with the RSI.
7. Ichimoku cloud – Japanese tool that shows trend, levels and signals all at once. Requires practice, but gives deep insight into the market.

Patterns – pure price behaviour

Candlestick and chart patterns in technical analysis of cryptocurrencies reveal behavioural patterns. Their effectiveness has been proven for decades in traditional and digital markets.

The main patterns are:

1. ‘Absorption’ – a reversal signal.
2. ‘Hammer’ and “Executioner” – indicate a change in sentiment.
3. ‘Doji’ – a signal of uncertainty.

Chart patterns:

1. ‘Head and Shoulders’ – a reversal signal.
2. ‘Flag’ and “Pennant” – trend continuation.
3. ‘Double Top/Bottom’ – confirmed reversal.

Psychology and behaviour: the basis of cycles

Technical analysis of cryptocurrencies is based on understanding the phases the crowd goes through: it is the psychology of the crowd that determines price movements. Each movement reflects a specific emotional state of the participants: from hope to panic.

The first phase is formed at the moment of accumulation. Experienced participants set underestimated levels, volumes grow weakly, the price moves sideways. Here the basis is formed for future growth, which the crowd does not yet perceive.

Then momentum ignites. Large orders push the price higher, the chart breaks through key levels. Interest in the asset grows and new entrants enter the market. At this stage, classic inertia manifests itself: growth generates demand, which triggers further growth.

At the peak of the cycle, the price enters the euphoria zone. The media publish optimistic headlines, talk shows are filled with ‘10 times’ predictions. New entrants enter easily, while volumes are already stagnant. Big traders lock in their profits. Reversal signals are ignored as emotions win out over logic.

Then liquidation begins. A sharp drop causes a shock, sellers rush to exit. Technical analysis of cryptocurrencies at this stage shows support breaks, candlesticks take an elongated shape with strong shadows. Panic peaks when the price breaks accumulation levels.

This is followed by the capitulation phase. Everyone leaves the asset, participants lose confidence. The chart shows a deep pullback with minimal volatility. It is at this point that the bottom is formed. This is where the most profitable positions are opened, against the mood of the crowd.

Consolidation completes the cycle. The market enters the sideways corridor, the big players accumulate volumes again. Everything repeats itself. With technical analysis of cryptocurrencies, you can follow this recurring scenario and use it to the benefit of your strategy.

Time frames and strategies: short-term vs. long-term

The holding period of a position affects the whole analysis algorithm. A short-term trader relies on momentum, while a long-term trader relies on structure. Technical analysis of cryptocurrencies shows different price behaviour at different time intervals. It is important to adapt the methodology to your own style.

Scalping involves working on minute charts. In the M1-M15 segments, price moves impulsively, with sharp shocks. Reaction speed is important here. Analysis is based on continuation, breakout and rebound patterns. Fast indicators (stochastics, VWAP) help detect pullbacks with minimal delay.

M30-H1 time frames are used for intraday trading. Intraday movement is observed in these ranges. Operating levels are based on daily highs and lows. Volumes and price behaviour at the opening of the session are taken into account. Technical analysis of cryptocurrencies at this level allows finding entry zones during the day and closing the position before the end of the day.

Swing trading requires observation of H4 and D1. Analysis includes leading figures, moving averages and accumulation volumes. A trader holds a position for several days and focuses on the changing market structure. Signals with confirmation are important here. Errors become more critical, so analysis requires more precision.

Position trading is based on a weekly chart (1W). The most important thing here is the trend. Tools: MA200, resistance support levels, head and shoulder figures, double bottom. Volumes indicate stages of accumulation or distribution. Technical analysis of cryptocurrencies on a high timeframe shows the general mood of the market and allows you to make long-term investment decisions.

Conclusion

Technical analysis of cryptocurrencies is not just about lines and charts. It is a layered system that combines psychology, mathematics and strategy. It is based on the logic of repetition, behavioural patterns and analysis of price-volume interaction. The deeper the analysis, the more reliable the input. Accuracy is achieved with practice and results with a systematic approach.