This year, we can see that cryptocurrencies are moving up and down on a daily basis, up to 15% of the value. Such price changes are known as volatility. What if … this is completely normal and sudden changes are one of the features of cryptocurrencies that allow them to make good profits?
First of all, cryptocurrencies have recently become popular, so all the news and rumors about them are “hot”. After every statement by government officials about regulating or banning the cryptocurrency market, we are witnessing large price movements.
Second, the nature of cryptocurrencies is more like a “storehouse of value” (as in the past with gold) – many investors see them as a backup investment option in stocks, physical assets such as gold and fiat (traditional) currencies. The transfer rate also affects the volatility of the cryptocurrency. Transfers with the fastest ones take even a few seconds (up to a minute), which makes them an excellent asset for short-term trading, if there is currently no good trend for other types of assets.
One thing to keep in mind is that this speed is in line with the lifetime trends of cryptocurrencies. In ordinary markets, trends can last for months or even years – even for days or hours.
This takes us to the next point – even if we are talking about a market with hundreds of billions of dollars, it is still a very small amount compared to the traditional currency market or the daily trading volume of stocks. Therefore, a single investor trading 100 million shares on the stock exchange will not cause a major price change, but it is an important and noticeable transaction in the cryptocurrency market.
Because cryptocurrencies are digital assets, they are subject to technical and software updates of cryptocurrency features or the expansion of blockchain partnerships that make it more attractive to potential investors (for example, activating SegWit doubles the value of Bitcoin).
The combination of these elements in the price of cryptocurrencies can be several hours, days, weeks, etc. are the reasons why we observe such large price changes during
But answering the question from the first paragraph – one of the classic rules of trading is to buy cheap, sell expensive – so the presence of short but strong trends every day (instead of weaker trends lasting weeks or months, as in stocks) gives more chances. to get a decent income if used properly.