This year we can see that cryptocurrencies tend to go up and down even 15% of the value daily. These 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, cryptocurrencies hit the mainstream very recently, so all the news about it and rumors are “hot”. After each statement by government officials about the possible regulation or ban of the cryptocurrency market, we observe large 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 security investment option for stocks, physical assets such as gold and fiat coins (traditional). The transfer rate also influences the volatility of the cryptocurrency. With the fastest, the transfer takes even a couple of seconds (up to a minute), making them an excellent asset for short-term trading, if there is currently no good trend in others. asset types.
What everyone should keep in mind: This rate also adapts to the useful life trends of cryptocurrencies. While in regular markets, trends can last for months or even years, here it takes place in even 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 a very small amount compared to the daily trading volume compared to the US market. currencies or traditional stocks. Therefore, a single investor making 100 million transactions in the stock market will not cause a big price change, but at the scale of the cryptocurrency market, this is a significant and remarkable transaction.
Because cryptocurrencies are digital assets, they are subject to technical and software updates to cryptocurrency functions or the expansion of blockchain collaboration, making it more attractive to potential investors (such as SegWit activation basically caused the value of Bitcoin to double).
These combined elements are the reasons why we are seeing such huge price changes in the price of cryptocurrencies in a couple of hours, days, weeks, and so on.
But answer the question of the first paragraph: one of the classic rules of trade is to buy cheap, sell high; therefore, having short but strong trends every day (instead of weaker ones lasting weeks or months as in stocks) gives many more possibilities. to get a decent profit if used correctly.