Cryptocurrency Volatility - Threat Or A Chance
Volatility of Bitcoin is a thing discouraging many people from investing in cryptocurrency. Here we explain the nature of it and tell why this can be beneficial for the users.
The volatility of Bitcoin – is it really a reason why not to invest in a cryptocurrency?
In one of the previous articles How to Profit From Bitcoin, we have explained how to profit with Bitcoin. Still, many people avoid buying Bitcoin, as well as general cryptocurrency trading. They are literally shivering when hearing one term: cryptocurrency volatility (especially when speaking of Bitcoin). Therefore we will address one simple question: Volatility of Bitcoin – is it really a reason why not to invest in a cryptocurrency?
First of all, let's see an example: take a look at the chart showing bitcoin price history:
What can you see at this bitcoin price chart (period from February up to august 2018)?
The price of Bitcoin is fluctuating a lot - often rising or dropping a few per cent per day. This is a turn off for many who focus upon trading NASDAQ or another stock market index, where daily changes are usually no more than 1-2 per cent per day.
And guess what? Cryptocurrency volatility (especially for Bitcoin) is not a bug. It is a feature, caused by several factors:
- 1) General cryptocurrency news. As the first Bitcoin transaction took place just in 2010 (hence the international bitcoin pizza day), news have a really big impact on the Bitcoin price. Way bigger than at any investment method – therefore many cryptocurrency owners buy or sell basing on the news, which can change the daily price of Bitcoin for several percent
- 2) Bitcoin news themself. As this is the biggest cryptocurrency all news related to it have a significant impact on the rest of the cryptocurrency market. The news about Bitcoin will influence other cryptocurrencies just like US stocks influence European or Asian stock market.
- 3) Cryptocurrency transaction speed. The idea of fast cryptocurrency as speaking of transfers was the idea behind many cryptos – check for example how fast is Ripple for the purpose of transactions. This means that when there will be
How big is the crypto market. As it is a relatively new type of trading, it is way smaller than the fiat currency market. Therefore each transaction has bigger impact on the cryptocurrency market than for example a purchase of foreign currency. When it will grow as the times pass by in next decades, the volatility and chance to make big profits over a short period of time will become a story of the past.
The existence of cryptocurrency annual trends. It can be best seen best on the Bitcoin cryptocurrency chart each year - shortly before Christmas we can see a downtrend, lasting usually until January or February. Why is that? There's a simple answer. Christmass shopping, winter holidays and annual tax payment combined
All the abovementioned elements can contribute to making cryptocurrencies very useful payment method and obviously a very profitable investment when bought at the right moment.