This year we can see that cryptocurrencies move up and down 15% of the price on a daily basis. Such changes in prices are known as volatility. But what if … these completely normal and sudden changes are one of the features of cryptocurrency that allows you to make good profits?
First, cryptocurrencies have become mainstream very recently, so all the news and rumors about them are “hot”. After every statement by government officials about regulating or banning the cryptocurrency market, we see huge price movements.
Second, the nature of cryptocurrencies is much like a “price shop” (like gold was in the past) – many investors consider them as an alternative to backup investing in physical assets such as stocks, gold and fiat (traditional) currencies. The speed of transfer also affects the volatility of cryptocurrencies. With the fastest ones, the transfer takes just a few seconds (up to a minute), which makes them a great asset for short-term trading, if there is currently no good trend on other types of assets.
One thing to keep in mind is that cryptocurrencies also have a lifetime trend. Regular market trends can last for months or even years – here it happens in just a few days or hours.
This brings us to the next point – even though we are talking about a market worth hundreds of billions of US dollars, it is still much less than the daily trading volume of the conventional currency market or stocks. So 100 million transactions in the stock market will not cause a huge change in the value of a single investor, but it is a significant and significant transaction on the scale of the cryptocurrency market.
Since cryptocurrencies are digital assets, they are subject to technical and software updates of cryptocurrency features or expansion of blockchain collaboration, which makes it more attractive to potential investors (e.g. SegWit activation essentially doubles the value of bitcoin).
It is because of the combination of these elements that we are seeing such a big change in the price of cryptocurrency in a matter of hours, days, weeks, etc.
But answering the question in the first paragraph – one of the classic rules of trading is to buy cheap, sell more – so having a small but strong trend every day (instead of lasting weeks or months like stock) gives a lot more opportunities to make a decent profit if used properly. .