This year we can observe that cryptocurrencies tend to go up and down even by 15% of the value daily. Such price changes are known as volatility. But what if … it's perfectly normal and sudden changes are one of the features of cryptocurrencies that allow you to make good profits?
First of all, cryptocurrencies have arrived very recently, so all the news about them and the rumors are "hot". After each statement from government officials on 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 has been in the past) – many investors see it as a back-up investment option for stocks, physical assets like gold and fiat (traditional) currencies. The transfer speed also has an influence on the volatility of the cryptocurrency. With the fastest, the transfer takes only a few seconds (up to a minute), making it an excellent asset for short-term trading, if there is currently no good trend on other types of assets.
What everyone should keep in mind – this speed also goes for the lifespan trends of cryptocurrencies. While in regular markets, trends can 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 very small compared to the volume of daily trades compared to the market or traditional stocks. Therefore, a single investor making 100 million stock trades will not cause huge price changes, but on the scale of the cryptocurrency market it is all about 39; an important and noticeable transaction.
Since cryptocurrencies are digital assets, they are subject to technical and software updates to cryptocurrency functionality or to growing blockchain collaboration, which makes it more attractive to potential investors (such as 39; activation of SegWit, the value of Bitcoin has essentially doubled).
These elements combined are the reasons why we observe such huge price changes in the price of cryptocurrencies within hours, days, weeks, etc.
But answer the question in the first paragraph – one of the classic rules of trading is to buy at low prices, sell high – so have short but strong trends every day (instead of weaker trends for longer periods. weeks or months like stocks) gives a much greater chance of making a decent profit if used correctly.