This year we see that cryptocurrencies tend to grow and fall even by 15% of their value daily. Such price changes are known as volatility. But what if … this is perfectly normal, and sudden changes – one of the characteristics of cryptocurrencies, allowing to make a good profit?
First, cryptocurrencies have become mainstream only recently, so all the news and rumors about them are “hot”. After each statement of government officials about the possibility of regulating or banning the cryptocurrency market, we see massive price fluctuations.
Secondly, the nature of cryptocurrencies is rather a “means of saving” (as gold was in the past) – many investors consider them as a reserve option to invest in stocks, physical assets such as gold and (traditional) fiat currencies. The speed of translation also affects the volatility of the cryptocurrency. In fact, the fastest transfer takes only a few seconds (up to a minute), which makes it a great asset for short-term trading if there is no good trend for them. Other types of assets at this time.
What everyone should consider – this rate also applies to trends in the life expectancy of cryptocurrencies. If the trends in the major markets can last for months or even years, then here it happens in days or hours.
This brings us to the next point – although we are talking about a market worth hundreds of billions of dollars, it is still a very small amount compared to the daily volume of trading against currency markets or traditional stocks. Therefore, one investor making 100 million transactions on the stock market will not cause a huge price change, but in the cryptocurrency market it is a significant and noticeable transaction.
Since cryptocurrencies are digital assets, they are subject to technical and software updates of cryptocurrency functionality or the expansion of blockchain collaboration, which makes it more attractive to potential investors (since the activation of SegWit has actually doubled the value of bitcoins).