Technical Analysis as a Tool for Determining Cryptocurrency Trends in Times of Chaos

Abstract

Technical analysis is a widely applied method for forecasting market trends and making investment decisions. This article assesses the effectiveness of basic technical analysis indicators, such as MACD, EMA, and trendlines, in the volatile cryptocurrency market during significant events like the COVID-19 pandemic and Russia’s aggression against Ukraine. The study utilizes weekly data from 2018 to 2023, focusing on Bitcoin and Ethereum due to their high market capitalization. The results confirm that these tools can provide valuable investment signals, particularly during periods of high market volatility, identifying trend changes and key entry or exit points. However, limitations of technical analysis, such as conflicting signals among indicators, highlight the need for caution and a multilayered analytical approach. Notable findings include the effectiveness of using multiple indicators simultaneously to enhance decision-making and the potential risks of relying solely on individual indicators.

The research also acknowledges the challenges posed by external, unpredictable events, such as the collapse of major projects or regulatory changes, which can disrupt market dynamics. Despite these challenges, the findings underscore the relevance of technical analysis in modern financial contexts, providing investors with practical insights for navigating volatile markets.

This study contributes to the understanding of cryptocurrency markets by demonstrating the utility of traditional technical tools in identifying trends, while stressing the importance of their thoughtful application in conjunction with other analytical methods.