Volatility of cryptocurrencies, a profitable roller coaster

This year we can see that cryptocurrencies tend to rise and fall even 15% of the value daily. Such price changes are known as volatility. But what if… this is totally normal and sudden changes are one of the characteristics of cryptocurrencies that allow you to make good profits?

First of all, cryptocurrencies hit the mainstream very recently, therefore all the news and rumors about them are “hot”. After every statement from government officials about the possible regulation or banning of the cryptocurrency market, we see huge price movements.

Second, the nature of cryptocurrencies is more like a “store of value” (as gold had been in the past) – many investors consider them a backing investment option for stocks, physical assets like gold, and currencies. fiduciary (traditional). The transfer speed also influences the volatility of the cryptocurrency. With the faster ones, the transfer takes even a couple of seconds (up to a minute), which makes them a great asset for short-term trading, if there is currently no good trend in other types of assets.

What everyone should keep in mind: That speed also applies to cryptocurrency lifespan trends. While in normal markets trends can last for months or even years, here they take place even in days or hours.

This brings us to the next point: although we are talking about a market that is worth hundreds of billions of US dollars, it is still a very small amount compared to the daily trading volume compared to the traditional forex market or stocks. So a single investor making a 100 million stock market transaction will not cause a huge price change, but on the scale of the cryptocurrency market, this is a significant and remarkable transaction.

As cryptocurrencies are digital assets, they are subject to technical and software upgrades of cryptocurrency features or expansion of blockchain collaboration, making them more attractive to potential investors (like the activation of SegWit basically made the value of Bitcoin will double).

These elements combined are the reasons why we are seeing such huge changes in the price of cryptocurrencies in a couple of hours, days, weeks, etc.

But answering the question in the first paragraph, one of the classic rules of trading is to buy low, sell high, therefore have short but strong trends each day (rather than weaker trends that last for weeks or months like in stocks). ) gives much more possibilities. for a decent profit if used correctly.