Exclusive: Technical VS Fundamental Analysis for Crypto Valuation?

In traditional stock investment, traders perform technical analysis to carry out price forecasts or fundamental analysis to reveal the intrinsic value of the stock. However, which methods should be used for crypto valuation? This is the question most crypto traders care about.

We had the opportunity to speak with Clemen Chiang of Spiking, which Clemen revealed his answers in this heated debate!

We know that Spiking can forecast stock prices using AI technology. Can you elaborate the difference between crypto and stocks?

For Spiking, we started off as a FinTech company in stock market. Then we started our venture into cryptocurrency market last year. We use artificial intelligence (AI) to track trading activities of the billionaires, millionaires and whales in the stock market.

We have a list of all the important wallets that we need to track. Just on the stock market alone, we are tracking over 180,000 billionaires, millionaires, whales, insiders of companies, there's a huge bunch of them. But there's so much data out there that we call it the big data. AI allows us to seek out the notable purchases in the stock market. We have launched our desktop version on spiking.com and we were able to predict stock price over three time periods. The first time period, within the three weeks. Second one, within three month and for the third one, within one year.

There's a huge difference between crypto versus stocks. For crypto we are tracking the wallets which it is not simple to reveal the identity of the wallet owner. Many crypto traders love crypto because they want to remain anonymous. On the contrary, because of the regulation on securities, traders have to disclose their identity in stock market and it is mandatory whenever they buy or sell shares, they have to inform the exchange. That's the distinction between stocks versus crypto.

Clemen revealed his answers on the Technical VS Fundamental analysis debate!

In terms of crypto valuation, are you a believer in technical or fundamental analysis?

This is a very good question, I can tell you before we got listed on the exchange, I used to believe in both fundamental and technical analysis for crypto. But after we got listed on exchange, I no longer believe in both! This is very unique for crypto currency. As I say this, I hope the viewers and the readers don't get offended.

Why do you think technical is no longer relevant to crypto valuation?

Let’s take a look at technical analysis. Technical analysis has been practicing in a stock market for more than hundreds of years. Because in the past, there's no TV and social media, you only have print and every trader out there would wait for the first print of the newspaper to show the opening, high, low, close price. Then they started to plot the charts themselves. They have to rely on technical analysis very heavily because they got no other sources of data or information to rely on. From the historical past, it had been passed down. As a result, it nurtured a whole generation of technical traders, we call them the technicians. Technicians play a very important role in the stock market, they set the support line as well as the resistance line. That is very true in the stock market.

Unfortunately, if you take the same thesis for technical analysis and apply it in cryptocurrency, most of the time they do not apply for two reasons:

1) Cryptocurrencies do not have the legacy of history.

2) The crypto traders are not technicians. They are the ones using the “pump and dump” strategy. These speculators have no rules of engagement and they dream about the moon every day. As a result, the self-fulfilling prophecy of technical analysis cannot take its roots within cryptocurrency market and there’s no way you can think of its roots.

How about fundamental analysis?

Let's talk about fundamental analysis. We start from the concept of “Value investing” from Warren Buffett's teacher, Benjamin Graham. I was a strong believer in fundamental analysis back in the old days. You have to study and be familiar with over 300 different price metrics from price ratio, price earnings ratio, debt equity ratio etc. The whole thesis behind it is that they believe in intrinsic value. Today, if the market is trading below the intrinsic value, this is a good opportunity to buy at a low price until the market price go to the same level of the intrinsic value they will sell. That is the whole thesis of fundamental analysis of what we called value investing. Most of them still do that today. But unfortunately, recent moves by Warren Buffett debunked all the myth about value investing. Why?

According to Warren Buffett, he bought a share of a company that he would never sell, which was true for many years. Until very recently, Buffett bought into shares of Oracle probably in December last year. However, he sold off everything in 3 months! There is no value in value investing. How could you change your mind within a three month time period! That has been posed by the interviewer Becky from CNBC asking Buffett  this question. Buffett said he failed to understand cloud computing even after he sold the shares. That's it, it is because of his understanding, not because of fundamental analysis. There's nothing wrong with the company, it is his lack of understanding. He believes that Oracle can be the number one in cloud computing space, but after three months of study he gave up. You take the same whole thesis of fundamental analysis apply in the cryptocurrency.

What fundamentals may I know you are studying? There's not much fundamental. I'm the leading expert in ICO Bench where it was consistently ranked top 10 in the world. I've written over 200 different projects. When you look at a project, what is the fundamental value you're looking for? You can't find other than a management team, the purpose of project and the community. That's all. There's no metrics for you to go after, so that’s no way you can do fundamental analysis.