This christmas we can observe that cryptocurrencies tend to move up and down possibly even by 15% of value on a daily basis. Such changes of rate are known as a volatility. But what if… this is totally normal and also sudden changes are one of the characteristics of the cryptocurrencies allowing you to develop a good profits?
First of all, the cryptocurrencies made it to the general audience very recently, therefore all the news regarding them along with rumors are “hot”. After each statement of government authorities about possibly regulating or banning the cryptocurrency markets we observe huge price movements.
Secondly the nature of cryptocurrencies is more like a “store of value” (like gold happened to be in the past) – many investors consider these as burn investment option to stocks, physical assets like gold in addition to fiat (traditional) currencies. The speed of transfer has additionally an influence upon volatility of the cryptocurrency. With the easiest ones, the transfer takes even just couple of minutes (up to a minute), what makes them excellent asset just for short term trading, if currently there is no good trend regarding other types of assets.
What everyone should bear in mind – that quickness goes as well for the lifespan trends on crypto foreign currency. While on regular markets trends might last months or simply years – here it takes place within even days and also hours.
This leads us to the next point – eventhough we are speaking about a market worth hundreds of billions of US $ $ $ $, it is still very small amount in comparison with daily trading size comparing to traditional currency market or stocks. Therefore about investor making 100 million transaction on stock market planning to cause huge price change, but on scale regarding Crypto News crypto currency market this is a significant and noticeable transaction.
When crypto currencies are digital assets, they are subject to complicated and software updates of cryptocurrencies features or enlarging blockchain collaboration, which make it more attractive to the potential individuals (like activation of SegWit basically caused value of Bitcoin to be doubled).
These elements combined are the reasons why we are following such huge price changes in price of cryptocurrencies within pair of hours, days, weeks etc .
But answering the subject from the first paragraph – one of the classic rules involving trading is to buy cheap, sell high – for this reason having short but strong trends each day (instead connected with way weaker ones lasting weeks or months for example on stocks) gives much more chances to make a decent return if used properly.