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 recently, so all the news and rumors about them are “hot”. After each statement by government officials about the possibility of regulating or banning the cryptocurrency market, we observe huge price movements.
Second, the nature of cryptocurrencies is more like a “store of value” (as gold had been in the past): many investors consider these alternative investment options to stocks, physical assets such as gold. and (traditional) fiat currencies. The transfer rate also influences the volatility of the cryptocurrency. With the fastest, the transfer lasts only 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 other types of trading. ‘assets.
What everyone should keep in mind: that speed also goes for trends in the useful life of cryptocurrencies. Although in the usual markets the trends can last for months or even years; here it occurs 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 foreign exchange market. or traditional actions. Therefore, a single investor making 100 million transactions on the stock exchange will not cause a huge price change, but at the scale of the cryptocurrency market it is an important and remarkable transaction.
Because cryptocurrencies are digital assets, they are subject to technical and software updates to cryptocurrency features or to a larger blockchain collaboration, which make it more attractive to potential investors (such as the activation of SegWit basically doubled the value of Bitcoin).
These combined elements are the reasons why we observe such important changes in the price of cryptocurrencies in a couple of hours, days, weeks, and so on.
But answer the question in the first paragraph (one of the classic rules of trading is to buy cheap and sell highly), so have short but strong trends every day (instead of weaker forms that last for weeks or months, such as in shares), offers many more chances to make a decent profit if used correctly.