One of the critical attributes of Bitcoin and digital currency, in general, is that it’s subject to wild fluctuations. While these swings may overwhelm a beginner in Bitcoin investments, they’re a blessing to individuals who understand the nature and behavior of virtual currencies. Fluctuations create opportunities for traders who’re determined to get a breakthrough in the world of digital currency. Therefore, equipping yourself with knowledge about these movements can assist you in succeeding in BTC trading. So whether you’re a new bitcoin investor or a veteran, BTC swings are critical to you. Are you wondering what brings about bitcoin price movements, how often the changes occur, and the benefits of these fluctuations? Please stay tuned.
Basics about bitcoin volatility
For beginners, it is essential to understand that bitcoin’s price fluctuations aren’t going away soon. The crypto market works similarly to the other market, meaning that events from the real world can significantly impact it.
For example, when Facebook announced it would launch a cryptocurrency called Libra, bitcoin prices fluctuated even though the currency was not established. Furthermore, even an announcement from an influential person like the US president could have a significant impact on Bitcoin prices. However, these occurrences don’t have a substantial effect on Bitcoin prices.
There are other factors that can affect bitcoin’s volatility. Let’s take a look at some of them.
Emotions of investors
The price fluctuation of Bitcoin and other cryptocurrencies is influenced by the emotions and moods of different investors. Some investors panic and sell their bitcoins, thus leading to a decrease in the value of bitcoin. Many people have lost confidence in the traditional currencies, making them seek alternative forms of storing money. These emotions include euphoria, emotional attachment, and fear.
Market immaturity
Ten years may seem too long for you, but it’s a very short period for a market. Most experts believe Bitcoin Is still not mature enough. Bitcoin is yet to attain its full potential based on its utility and technology. Like any other market in its infancy, prices are driven mainly by public sentiments.
Regulations
Lack of bitcoin regulation is not a surprise if you have been to the crypto industry before. Earlier on, there were no regulatory measures to control activities in the crypto world. A lot of investors felt a bit skeptical about joining. That made bitcoin susceptible to changes in prices.
Recently, governments have made efforts to regulate digital currencies. For example, most states in the US require bitcoin traders to have equivalent money in regular currency or surety bonds for exchanges within the jurisdictions. However, these regulations are subject to failure since bitcoin has decentralized ledgers everywhere. Regulations require coordination from several economies.
Can bitcoins volatility become a problem?
You may think that the bitcoin market won’t be as volatile as it is now in the future. After all, there will be technological advancements for secure and quicker transactions, making bitcoin more stable.
If you’re a short-term bitcoin trader or investor, the bitcoin’s price volatility may work in your favor. Since trading in the short term involves making fast minute or second-to-second transactions, making accurate speculation on price changes can be difficult. There are other ways, like working on long spans such as weeks. However, the process can still be very confusing.
Bitcoin volatility happens drastically, and chances are bitcoin owners will have a fear of missing out (FOMO). These holders occasionally have a difficult time deciding whether to sell their hard-earned bitcoins or rather buy more.
If the prices significantly go up, the bitcoin holder, more so those who have many coins, can get very excited. On the other hand, those with fewer coins may have a regretful experience. If there is a significant reduction in prices, holders with vast bitcoin amounts may regret why they didn’t sell right away.
The volatility of bitcoin shouldn’t be a big deal, particularly if you consider it before making your investment. The volatility creates a plethora of opportunities for both beginners and veterans.
However, if you’re a new investor, you’ll have to learn more about price volatility. Although the bitcoin’s price fluctuations may not be a big deal per se, we have to consider if it comes with added risks. You should evaluate your strategy and how much risk you can take before investing. Always remember that when dealing with risky investments, one simple mistake can make you lose your hard-earned money.
Where to benefit from bitcoins volatility
You can either choose to go for P2P exchanges or stick with a reliable forex trader. Check out the official website to register and immediately begin earning money trading with Immediate Bitcoin. Immediate Bitcoin is an excellent choice for beginners and seasoned traders. You can create an account for free and immediately begin to purchase bitcoins.
There’s strict adherence to security protocols in technology and legal matters. The system follows a multi-signature control system that ensures your bitcoin is kept safe. That means that the system can’t be hacked.
What’s better is the speed at which you can exchange your bitcoin. In a volatile market, minutes and seconds could mean the difference. It helps to have an alternative that you can react accordingly in case the price falls or rises within a moment. So, whether you’re a beginner or a seasoned investor, you can try out trading with Immediate Bitcoin.
How you can use bitcoin’s volatility to your advantage
Now that you know enough about bitcoin’s price volatility, the chances are that the question crossing your mind is how you can use price volatility to your advantage. Here are simple ways to gain from volatility.
Margin trading
Margin trading is by far the riskiest alternative you have. You can easily get your assets liquidated quickly by taking advantage of the high leverage offered by forex brokers. If you do margin trading intelligently, you can profit 100 times more than the initial investment.
You don’t have to rely on the price increase to make money. Going short on your investment when you speculate prices will reduce can also earn you profits. However, there are so many factors to consider before giving crypto margin trading a try.
If you’re a beginner, you can start with small leverages of about 3X or 4X. Small leverages will reduce the risk of liquidation. Always make sure that your deposit is something you can stand to lose. Avoid treating your margin trading as a passive investment. It would be best if you keep monitoring your current positions because an unexpected fluctuation could bring massive losses. You must always be ready to respond if the trade fails to go according to your plan.
You can always set a stop-loss to limit the number of losses you make. With a stop-loss limit, you can’t lose more than your initial deposit if things don’t go as planned. It is essential to know about risk management and hedging. Even if you’re the best at analyzing market trends, it’s always necessary to stake what you can afford to lose.
Dollar-cost averaging (DCA)
This is by far the safest option—dollar-cost averaging entails investing a fixed amount of money into bitcoin at regular intervals. For example, you can decide to invest $10 every week.
You can dollar-cost averaging if you want to purchase bitcoin for the long-term because it protects you from allocating all your money during a price peak. Since the DCA strategy aims at regularly buying with small amounts of money, you don’t have to commit a massive upfront payment. DCA will work perfectly for you if you’re not comfortable with investing your savings at once. You can instead invest a small chunk from your salary.
Most people who hold Bitcoin for more than three years are guaranteed profit on the initial investment. However, many people are short-term bitcoin owners. These investors sell their bitcoin fast because they didn’t take time to understand the dynamics of Bitcoin. The dollar-cost averaging gives you time to research BTC before you allocate your entire investment.
The toll an investment takes on your mental health is an underrated point to consider as you engage in any form of investment. By using the dollar-cost averaging strategy, you won’t have to worry about price fluctuations constantly. Instead, the amount you invest will continue growing as you get accustomed to the volatility.
Buying bottoms and selling tops
Bitcoin traders can make a lot of money by buying low and selling when prices increase. However, the most difficult thing for investors is to determine these points. They are subjective and may vary in different time frames. For this strategy, you need to take time and learn. After that, the process becomes easier than you thought.
Conclusion
Many factors affect the volatility of bitcoin. Bitcoin’s price volatility can have a positive or negative impact on your investment. It all narrows down to the choice of investment strategy you use. If you want to gain from bitcoin’s volatility, you need to be patient enough to learn before you get involved. Make sure you keep what you have learned from this post, and you will gain unbelievably from bitcoin volatility.