This year we can see that cryptocurrencies tend to go up and down even by 15% of their value on a daily basis. 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 hit the mainstream lately, so all the news and rumors about it are “hot”. After every statement by government officials about regulating or banning the cryptocurrency market, we notice huge price movements.
Second, the nature of cryptocurrencies is like a “store of value” (like gold in the past) – many investors consider it a reserve investment option for stocks and physical assets like gold and (conventional) fiat currencies. The speed of conversion also affects the volatility of the cryptocurrency. With the fastest, the conversion takes only a few seconds (up to 1 minute), which makes it an excellent asset for short-term trading, if there is currently no good trend for other asset types.
What everyone should take into account – this speed is also in line with the trends of the age of cryptocurrencies. Whereas normal market trends may last for months or even years – here they happen within days or hours.
This brings us to the next point – although we are talking about a market worth hundreds of billions of US dollars, it is still a very small amount in terms of daily trading volume compared to the traditional currency or stock market. So a single investor making 100 million transactions in the stock market will not cause a significant price change, but on the scale of the cryptocurrency market, this is an important and noticeable transaction.
Since cryptocurrencies are digital assets, they are subject to technical and programmatic updates to cryptocurrency features or the expansion of blockchain cooperation, which makes them more attractive to potential investors (such as the activation of SegWit basically caused the value of Bitcoin to double).
Together, these elements are the reasons why we notice such huge changes in cryptocurrency prices in a matter of hours, days, weeks, etc.
But answering the question from the first paragraph – one of the classic rules of trading is to buy cheap, sell high – so having short but strong trends every day (instead of weak trends lasting weeks or months like stocks) gives much greater chances of making a decent profit If used properly.