This year, we can see cryptocurrencies moving up and down 15% of their value every day. Such price changes are known as volatility. But what if … this is completely normal and sudden changes are one of the characteristics of cryptocurrencies that allow you to make good profits?
First of all, cryptocurrencies have recently spread, so all the news and rumors about them are “hot”. We see large price movements after every statement about the regulation or banning of the cryptocurrency market by government officials.
Second, the nature of cryptocurrencies is similar to a “value store” (as was the case in the past with gold) – many investors see physical assets as gold and fiat currencies (traditional) as a stock-backed investment option. The rate of transfer also has an impact on the volatility of cryptocurrency. With the fastest, the transfer also takes a couple of seconds (up to a minute), which makes it a great asset for short-term trading, unless there is a good trend for other types of assets today.
What everyone needs to keep in mind – this is the speed with which trends in cryptocurrencies live. Although trends in ordinary markets can last for months or years, here it happens in even days or even hours.
This brings us to the next point: Although we are talking about a market worth hundreds of millions of dollars, it is still very small compared to the daily trading volume, compared to the traditional currency market or stock. So a single investor who makes 100 million transactions on the stock market will not cause much price change, but this scale of the cryptocurrency market is a significant and significant transaction.
Because digital currencies are digital assets, they are subject to technical updates to cryptocurrency features and software or blockchain collaboration, which makes it more attractive to potential investors (e.g., activating SegWit essentially doubled the value of Bitcoin ).
Combined with these items are the reasons we are seeing big price changes in cryptocurrencies for a couple of hours, days, weeks and so on.
But answering the first paragraph question – one of the classic rules of trading is to buy cheaply, to sell expensively – so having short but strong trends on a daily basis (rather than weaker ones that last for weeks or months) gives you many more options. if used properly to make a decent profit.