Cryptocurrency Trading

Failing Conventionally or Succeeding Unconventionally in Cryptocurrency Trading

August 20, 2019 0 Maheen Hernandez By Maheen Hernandez

Ed Butowsky stated, “Bitcoin is literally the riskiest tradeable asset right now, and I wouldn’t even call it an asset. It is backed by nothing and based entirely on speculation. That’s why it is so volatile. It’s a sucker’s bet, not a hedge.”

Cryptocurrency risk is assessed considering the volatility. However, this is one asset type that is not correlated either positively or negatively to any other asset type.  A change in volatility affects the pricing model of the target cryptocurrency.  Investors are forever in the lookout for reliable volatility forecasts.  Price changes influence investor decisions and their decisions related to risk management.

Volatility influences speculative action.  Several stylized facts, which is related to equity volatility and rival cryptocurrency forecasts, are essential for volatility traders.  Those who trade volatility are those who stabilize the price according to certain analysts.

In the cryptocurrency market, there is not a real gauge, which can help decide what makes an unnecessary price fluctuation or necessary price fluctuation.

In traditional stock markets, to insure against excess price fluctuations, they diversify their portfolio by investing in different asset types.  However, in the cryptocurrency market, when the Bitcoin falls every other token rises and falls with the asset type.  Therefore, there is an unexplained confusion about what is practical when it comes to diversification concerning cryptocurrency asset types.

Cryptocurrency market experience is a mix of fundamentals, current market information, and the current market expectations.  Interaction of all these elements echo the changes in the market.  The intensity of price fluctuations is based on political stability, regulatory action, use-case of tokens; the arrival of new information which influences the market, more modern expectations, and the factors are endless.  All of these factors embrace each other leading to a series of lagged responses.

Following the markets is critical in the cryptocurrency trading process.  Investors invest a lot in getting superior quality market information.

The origins of volatility are related to either uninformed behavior or a rational approach.  Unjustified price variability and excess volatility fade away in an efficient market. In the absence of special data that determines the price trends, the whole market works with the same set of information, and the speculators follow the market process.

Several investors judge their performance, considering how their peers make their decisions.  The market watches those who lose their profits because they did not follow their peers.  Whether one should fail conventionally or succeed unconventionally in the cryptocurrency trading process decides the kind of changes one would choose to make to their portfolio of cryptocurrency tokens.

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