This year, we can see that cryptocurrencies tend to move up and down, even with 15% of the daily value. Such a change in price is known as volatility. What if … this is completely normal and sudden changes are a feature of cryptocurrencies that allow you to make a good profit?
First of all, cryptocurrencies have recently become the mainstream, so all the news and rumors about them are “hot”. We are witnessing huge price movements after every statement by government officials about regulating or banning the cryptocurrency market.
Second, the nature of cryptocurrencies is more like a “storehouse of value” (as in the gold past) – many investors see it as a backup investment option in stocks, physical assets such as gold and physical currencies. The transfer rate also affects the volatility of the cryptocurrency. With the fastest ones, the transfer only takes a few seconds (up to a minute), which makes it an excellent asset for short-term trading, if there is currently no good trend in other assets.
What everyone should consider – this speed is also good for life trends in cryptocurrencies. Trends in regular markets can last for months or even years – even here for days or hours.
This takes us to the next point – even if we are talking about a market worth hundreds of billions of dollars, the daily trading volume is very small compared to the traditional currency market or stocks. Therefore, a single investor trading 100 million shares on the stock exchange will not cause a big price change, but it is an important and noticeable transaction on the scale of the cryptocurrency market.
Because cryptocurrencies are digital assets, they are subject to technical and software updates of cryptocurrency features or expand blockchain partnerships that make them more attractive to potential investors (activation of SegWit basically doubles Bitcoin).
Combining these elements, these are the reasons why we observe so many price changes in the price of cryptocurrencies in a matter of hours, days, weeks and hours.
But answering the question in the first paragraph – one of the classic trading rules is to buy cheap, sell a lot – so having short but strong trends every day (instead of weak ones lasting weeks or months like stocks) gives a lot more chances if used properly to make a profit.