Steve McDonald: Hi, everybody, I’m Steve McDonald. This is your Market Wake-Up Call. Our guest this week is Adam Sharp, the crypto king and Co-Founder of Early Investing LLC. He’s here to talk about fundamental versus technical analysis in buying cryptocurrencies. Welcome, Adam.

Adam Sharp: Thanks, Steve.

Steve McDonald: Now, when you say cryptocurrencies, most people immediately assume you’re talking about bitcoin. But there are many others, some of which are actually stronger than bitcoin. Can you talk about how this market has developed and actually exploded?

Adam Sharp: Over the last year is really when it happened. A year ago, the entire market was worth about $15 billion dollars – so this is thousands of cryptocurrencies that are tracked. I use a site called CoinMarketCap.com to look at it. So it’s gone from $15 billion to $500 billion in total value today. So it’s really just exploded. Bitcoin has done really well, obviously. It’s up about 10 times over the last year. But there are some smaller coins that are up 100 times, 200 times and even more. So yeah, it’s a really exciting market right now.

Steve McDonald: Now, most folks are very new to this market; they’re still learning the ropes. Can you talk about what technical analysis you use when you’re buying, and can you use it to time these buys? Because this stuff bounces around a lot it seems.

Adam Sharp: It does. Especially lately, it’s been quite volatile. Technical analysis is certainly a very valuable tool in the crypto market. What I do is I take a fundamental first approach where I find good coins that have good communities, good developers and solid technology. Then I look for buying opportunities using technical analysis. So I use two tools primarily. I use RSI, which is the Relative Strength Index. It just shows momentum and gives you a simple score you can look at that tells you whether the coin is oversold or overbought on a technical basis.

The other technical analysis tool that I use is called Fibonacci retracement. There’s certain points when a cryptocurrency is falling – or a stock, it works for stocks as well – where it tends to get support at a certain level. Nobody knows exactly why these certain levels work, but everybody believes in them, so they do. It’s kind of one of those self-fulfilling prophecies. So you look for whether a coin can hold at these Fibonacci support levels because coins generally have a big spike if they’re gaining in popularity and momentum. And then what you really want to watch for is when they fall back down… Do they find support at one of these Fibonacci retracement levels? If they do, it indicates that there’s pretty strong support from buyers, holders and investors as well.

Steve McDonald: In your experience, which is better at spotting the breakouts – fundamental or technical?

Adam Sharp: That’s a great question. I would have to say technical because cryptocurrency tends to be a very momentum-driven industry. Let’s just mention bitcoin for a minute. If one of your friends makes a bunch of money on bitcoin, he tells everybody at the office about it. It tends to spread virally. So there’s no advertising budget, it just spreads person to person. So coins that are doing really well tend to get strong technical momentum going, and there’s kind of these viral growth cycles where the coin goes through social circles and spreads out through people. You know, Bob makes money; he tells his five friends. Five of them buy and make money, and it just spreads outward like that. You can see that reflected mostly in technical analysis.

Steve McDonald: Give me one thing for the people watching this that they can hang their hats on – one fundamental indicator that you rely on when you’re picking cryptocurrencies.

Adam Sharp: Community. You want to make sure there’s an involved group of people who are owners and developers of the cryptocurrency – and make sure they’re legit. So if you go onto a site called Reddit, most cryptocurrencies have what’s called a subreddit. You can go on there and see everybody that’s discussing this cryptocurrency. Is the discussion healthy? Is it natural? Is it just a bunch of people talking about price? That’s a bad sign, generally. You want people who are having in-depth discussions about the future this cryptocurrency, and you also want to check out their code repositories. There’s a site called GitHub where most of these projects host all their code, and you can go on there and just see how active it is – how often they’re updating the software, essentially. So community is far and away the most important fundamental factor.

Steve McDonald: This whole cryptocurrency thing reminds me of the computer boom of the late ’80s and early ’90s. Everybody knew it was the future of things, but back then, nobody knew how to play it. I see the same thing here. Adam has a report out there right now. You can click on a link below that addresses just that: How do you play this crypto thing? Adam, I want to thank you for being with us, always a pleasure.

Adam Sharp: Thanks a lot, Steve.

Steve McDonald: It’s my pleasure. And for everybody here at the Market Wake-Up Call, I’m Steve McDonald. I’d take a close look at cryptocurrencies. I’ll see you next week.