This year, we can see that cryptocurrencies are fluctuating up and down by 15% on a daily basis. Such price changes are called volatility. But what if … this is completely normal and sudden changes are one of the characteristics of crypto currencies that allow you to make a good profit?
First of all, cryptocurrencies have recently entered the mainstream, so all the news about them and their rumors is “fresh”. Following the announcement by each government official about the control or banning of the crypto market, there will be significant price movements.
Second, the nature of crypto currencies is like a “stock market” (like gold in the past) – many investors consider these as real estate investment options for stocks, gold and fiat (traditional) currencies. Transfer speeds affect cryptocurrency volatility. In the fastest, the transfer takes about two seconds (up to one minute), which makes them a good asset for short-term trading, if there is no current trend in other asset types.
Everyone should keep in mind that the pace of life on crypto currencies is the same. While regular market trends can last for months or years – they happen here in days or even hours.
This leads us to the next point – although we are talking about a market worth hundreds of billions of dollars, it is very small compared to the traditional exchange market or stocks compared to the daily trading volume. So, investing in a stock market does not make a big difference in the 100 million trades, but in the crypto currency market, this is a significant trade.
As cryptocurrencies are digital assets, the characteristics of cryptocurrencies may be subject to technical and software updates or blockchain collaboration, making potential investors more attractive (as activated by SegWit basically doubling the value of Bitcoin).
These factors combine to make such huge changes in the price of cryptocurrencies in just a few hours, days, weeks, and so on.
But answering the question raised in the first paragraph – one of the most common rules of business is to buy cheap, sell high – so having short but strong trends every day (rather than being weak on stocks for weeks or months) offers many opportunities. To make good profit if used properly.