Entering the world of crypto can be overwhelming, especially to those who have no experience in trading and tech. With plenty of confusing jargons and buzzwords circulating the web, it’s no wonder lots of people are intimidated by the industry. Be that as it may, it’s never too late to start your journey as a crypto trader or investor.
To jumpstart your crypto portfolio, you need to understand the key concepts and jargons first. Once you’ve grasped these basic ideas, you’ll be able to make better decisions that can positively impact your crypto investments.
Among these key ideas you need to know is the price index. Not only will it help you understand a cryptocurrency at face value, but it will also give you an idea about the coin’s history and past performance. Find out why this concept is crucial in the world of crypto when you continue reading here at BTC Post.
What is a cryptocurrency price index?
A cryptocurrency price index shows the average price of a coin based on the last trading price listed on every crypto exchange site. It graphs the value of a crypto asset per day, marking whether its average worth has gone up or down.
Checking the price index is one of the best and easiest ways to assess a coin’s performance. Whether you’re a fundamental or technical analyst, you’ll always gravitate back to the price index. However, traders who practice technical analysis especially rely on the index when studying an asset since they focus more on what the graphs reveal rather than the external factors that can affect the coin’s performance.
Where does the price come from?
To better understand how it works, you need to know where a crypto’s listed price comes from. Whenever you see a crypto’s value, say Bitcoin, for example, what you’re seeing is actually the last price the coin was bought or sold on the exchange site. There are thousands of exchange sites available, with Binance, Coinbase, OKEx and Kraken as some of the most popular ones.
Each exchange site has a trading platform where traders can place market or limit orders. Here, you can find the site’s own price chart where orders placed exclusively on that site can be seen. Whenever an order is completed, the value it was sold or bought at becomes the latest price on that exchange. You can see this on the live chart.
To get the value on the index, all of the latest prices on all the crypto exchanges are considered and averaged. This becomes viewable on the price index so people can get a general idea of how the coin is performing.
Live chart and price index
When searching for Bitcoin’s or any other crypto’s price online, the words ‘live chart’ and ‘price index’ often come up. These two are similar in the sense that they both show a coin’s price but their difference lies in the factors considered in graphing the chart. However, they’re not mutually exclusive.
A live chart shows the real-time movement of a coin’s average price or its value on a specific exchange site. A price index is a live chart, but a live chart is not exclusive to a price index.
For example, if you go to an exchange site like Bitstamp, you can see a live chart of the BTC/USD trade pair. It changes every time a trade is done. However, you can’t view the pair’s price index that contains the average worth of all trades done on all exchanges. If you want to see the price index, you can check it on crypto news sites such as Coindesk, Cointelegraph and BTC Post.
Here, you can view the live chart of the coin’s price index and see how it performed on average. You can alter the time and history according to what you want to see.
Most used crypto charts
Depending on where you’re viewing the price index, you can customize it according to your preference. From the basic line graph to the most used candlestick chart, there are different charts to choose from. Each one shows a variety of information that you can use to spot trends, analyze data and speculate on the future price. Find the chart that suits your trading strategy so you can make informed decisions and potentially reap a hefty return of investment.
To learn more about the different types of charts, continue reading so you can better understand how to read a price chart.
Considered as the simplest of the charts, the line chart only graphs an asset’s closing price in a specific time period. It connects single points to create a visual representation of the price’s movement. Whether it moves up or down, you can see it clearly on the line chart. If you want a streamlined chart where only the most important factor is considered, then the line chart is ideal for you.
The candlestick chart is known as the trader’s choice. Most exchange sites use this as their standard since it contains a lot of vital information traders can use to recognize trends and patterns.
Instead of a single point like on the line chart, the candlestick chart contains ‘candles’ that reveal four prices, namely the open, high, low and close prices. That’s why it’s also known as the OHLC chart. The candles come in green and red to indicate whether the price rose or dropped compared to the previous day. If the candle is green, this means the coin’s value increased and if the candle is red, its price dropped.
A candle has four parts that indicate the four prices. The body shows the difference between the opening and closing price in a specific time period while the upper and lower wicks show the highest and lowest points the price reached within the same period.
Moving forward in the crypto world
Now that you know about the cryptocurrency price index, you can apply your newfound knowledge and improve your trading skills. If you want to know more, you can check the rest of the articles here at BTC Post where you can find everything about the world of crypto.
Bitcoin (BTC) $ 21,354.00 1.37%
Ethereum (ETH) $ 1,228.51 3.23%
Tether (USDT) $ 0.999991 0.03%
USD Coin (USDC) $ 1.00 0.24%
BNB (BNB) $ 239.66 3.05%
XRP (XRP) $ 0.367165 2.55%
Binance USD (BUSD) $ 1.00 0.14%
Cardano (ADA) $ 0.510445 5.37%
Solana (SOL) $ 40.67 1.44%
Dogecoin (DOGE) $ 0.074290 12.45%
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