This year we can observe that crypto currencies tend to move up and down even by 15% of value on a daily basis. Such changes of price are known as volatility. But what if… this is totally normal and sudden changes are one of the characteristics of the crypto currencies allowing you to make good profits?
First of all, the crypto currencies made it to the mainstream very recently, therefore all the news regarding them and rumors are “hot”. After each statement of government officials about possibly regulating or banning the crypto currency market we observe huge price movements.
Secondly the nature of crypto currencies is more like a “store of value” (like gold had been in the past) – many investors consider these as backup investment option to stocks, physical assets like gold and fiat (traditional) currencies. The speed of transfer has as well an influence upon volatility of the crypto currency.
With the fastest ones, the transfer takes even just couple of seconds (up to a minute), what makes them excellent asset for short term trading, if currently there is no good trend on other types of assets.
What everyone should bear in mind – which speed goes as well for the lifespan trends on crypto currencies. While on regular markets trends might last months or even years – here it takes place within seven days or hours.
This leads us to the next point – although we are speaking about a market worth hundreds of billions of US dollars, it is still very small amount in comparison with daily trading volume comparing to traditional currency market or stocks.
Therefore a single investor making 100 million transactions on stock market will not cause huge price change, but on scale of crypto currency market this is a significant and noticeable transaction.
As crypto currencies are digital assets, they are subject to technical and software updates of crypto currencies features or expanding block chain collaboration, which make it more attractive to the potential investors (like activation of Seg Wit basically caused value of Bit coin to be doubled).
These elements combined are the reasons why we are observing such huge price changes in price of crypto currencies within couple of hours, days, weeks etc.
But answering the question from the first paragraph – one of the classic rules of trading is to buy cheap, sell high – therefore having short but strong trends each day (instead of way weaker ones lasting weeks or months like on stocks) gives much more chances to make a decent profit if used properly.