Crypto trading veterans would perceive the extreme volatility of prices of the market to be just an ordinary occurrence. Infact, they love the volatility, because it makes them the money! Whereas a novice trader would probably lose his or her mind when having to deal with a drop or surge of “massive proportions” in possibly an hour’s timeline.
But the number one curiosity is what really causes such rapid fluctuations in the first place. Surely this can be explained?
Market forces at play
In general, the price for any cryptocurrency is mostly determined by the market itself. Bitcoin prices play a pivotal role in deciding the flavor of the day – red or green, due to the high correlation in token prices with Bitcoin’s price. If Bitcoin prices goes up, others will follow. This is recognized as a “market sentiment”.
Another important force at play would be “news”. It’s not unusual for hype to be generated on various Reddit forums and social media sites, leading to a rise in token price. Leaders of projects are also part of this equation. For example, Justin Sun of Tron Foundation is known for his art of generating hype for TRX with his style of “announcing the announcements”. Other notable members are John McAfee’s tweets that he charges hundreds of thousands of dollars for a release. This confirms the quote of “Buy the Rumour, Sell the News”.
Swimming with the Whales
Many will argue otherwise as they believe that the market is easily “manipulated” by those who have the money and influence. Well, they are not wrong. If there was a price surge event, and you were to ask any crypto “expert”, there’s usually an appropriate response. However, you’d find that these are usually just speculations. It is usually nothing more than a few whales playing in the markets – creating a pump and a subsequent dump; getting very rich out of it!
This occurrence is quite common in markets that are unregulated like the crypto market. So that is why when you ask REAL crypto veterans (like us), they would say to never buy the huge green candle as it may drop by half in less than a minute time. Never buy into the FOMO, anytime!
Being aware of what’s really happening is the FIRST step. However, always invest the amount you can afford to lose. You can be a millionaire one day and lose it all in a heartbeat. Trade carefully, and all the best!
Cover photo by: Pexels
Experienced in the technology and blockchain startups ecosystem, Benjamin honed his skills in the growth and operational development of many organizations. An huge fan of blockchain technology and its applications, he spends his time both investing and advising into blockchain projects and scalable development.