More Facts About Cryptocurrencies
This year, we can see that cryptocurrencies tend to fluctuate in value, sometimes by as much as 15 percent, daily. Volatility is the term used to describe such price movements. But suppose this is entirely normal, and sudden changes are one of the properties of cryptocurrencies that allows you to make significant gains? What if this is the case, and sudden changes are characteristics of cryptocurrencies that will enable you to make substantial gains?
First and foremost, because cryptocurrencies have only recently entered the public, all Cryptocurrency news and rumors about them are currently “hot.” Following each comment made by government officials concerning the possibility of regulating or prohibiting the cryptocurrency market, we see significant price fluctuations.
Second, the nature of cryptocurrencies is more like a “store of value” (like gold had been in the past) – many investors believe them to be a backup investment choice to equities, tangible assets such as gold, and fiat (conventional) currencies, among other things. The speed with which a cryptocurrency is transferred impacts the volatility of the coin as well. With the fastest ones, the transfer can be completed in a matter of seconds (or even less than a minute), making them a perfect asset for short-term trading when other types of assets are not trending well.
Everyone should keep in mind that the speed of change applies to both the lifespan trends and the lifespan of cryptocurrencies. While trends on traditional markets can last months or even years, they can occur in as little as a few days or hours on this platform.
As a result, although we are talking about a market worth hundreds of billions of dollars, it is still a very modest sum compared to the daily trading volume of the traditional currency market or the stock market, to which we are referring. A single investor completing 100 million transactions on the stock market will not result in a significant price shift. Still, on the scale of the cryptocurrency market, this is a substantial and noteworthy transaction.
Because cryptocurrencies are digital assets, they are subject to technical and software changes, including adding new cryptocurrency features or increasing blockchain collaboration, increasing their appeal to potential investors.
These factors, taken together, explain why we are witnessing such dramatic price movements in cryptocurrencies within a matter of hours, days, weeks, and even months.
Nonetheless, in response to the question posed in the first paragraph, one of the classic rules of trading is to buy low and sell high. As a result, having short but intense trends each day (instead of much weaker ones lasting weeks or months as they do on stocks) provides significantly more opportunities to make a decent profit if used properly.