This year we can see that cryptocurrencies tend to move up and down even by 15% of the value on a daily basis. Such price changes are known as volatility. But what if… this is perfectly normal և sudden changes are one of the characteristics of cryptocurrencies that allow you to make a good profit?
First of all, cryptocurrencies have appeared in the mainstream very recently, so all the news about them և the talk is “hot”. After each announcement by government officials about the possible regulation or prohibition of the cryptocurrency market, we notice huge price movements.
Second, the nature of cryptocurrencies is more like a “value store” (as gold once was) – many investors see them as a back-up investment in stocks, physical assets, such as gold (traditional) currencies. Transfer speed also affects cryptocurrency volatility. For the fastest, the transfer takes even a few seconds (up to a minute), which makes them a great asset for short-term trading if there is currently no good trend towards other types of assets.
What everyone should keep in mind. This speed also corresponds to the life trends of cryptocurrencies. While trends in regular markets can last for months or even years, here they occur even in days or hours.
This leads us to the next point. Or we are talking about a market worth hundreds of billions of dollars, it is still very small compared to the daily volume of trade compared to the traditional currency market or stocks. Therefore, a single investor making 100 million transactions in the stock market will not cause a huge change in prices, but this is a significant transaction on the scale of the cryptocurrency market.
Because cryptocurrencies are digital assets, they are subject to technical and software upgrades to cryptocurrency features or expanded blockchain collaboration, making it more attractive to potential investors (as SegWit activation has largely doubled the value of Bitcoin).
These elements are combined: the reasons why we notice such huge changes in cryptocurrency prices in a few hours, days, weeks, etc.
But answering the question of the first paragraph. One of the classic rules of trading is to buy cheap, sell high, and then have short but strong trends every day (instead of weaker ones that last for weeks or months, as in stocks), giving you much more opportunities. get a decent profit if used properly.