Cryptocurrency is the most disruptive event in the global economy since the 2008 financial crisis. The fact that they are truly anonymous and free has attracted hordes of fans.
The average daily price range of Bitcoin, i.e. the difference between the high and the low, is $660. Other traditional instruments like raw materials, currencies and stocks’ volatility is significantly lower and there are a number of reasons for that.
Possibilities for Making Money
Throughout the twentieth century, investment funds, market makers and various other major players have been attempting to curb the financial markets, making them calm and compliant for their own purposes. They have largely succeeded in doing just that.
Normal small traders can however still make a profit from daily fluctuations.
Nowadays, trading the differences in cryptocurrency values provide incredible money making opportunities. Digital assets’ volatility has become a perfect vehicle for intraday trading.
Wild Bitcoin versus Level Shares
If a trader opens a long position at a BTC price of $6 000, they can be reasonably sure of making a profit of $660, and vice versa. The low target of a short position at $7 000 can be at $6 340.
Let’s compare this to Apple shares whose average volatility since the beginning of the year has been around $3.07. It is logical that traders can’t expect to make more profit than the price movement’s range, which in this case is equal to $3.07.
These numbers are not based on assumptions, but on the Apple share price and bitcoin data in 2018.
Volatility can be an active trader’s true friend. The higher it is, the better your chances are of making good profits.
Trading Crypto on Olymp Trade’s Platform
Traders are not only able to trade bitcoin on the Olymp Trade platform, but also ten additional crypto assets, and two digital currency pairs: LTC / BTC and ETH / BTC.
Although each digital asset has its own volatility indicator in monetary terms, there is a strong correlation between BTC and other altcoins (cryptocurrencies).
This means that if Bitcoin’s value drops by 10% it is quite likely that Ethereum’s price will also be down by 10%. This happens all the time, despite the price differences of the crypto assets: the price of BTC is more than $6 000, while ETH’s price is less than $300.
Which Is More Profitable – Trading Or Investing?
Long-term investments in digital currencies is always questionable. Even if one’s investment portfolio is diversified, it is not possible to predict profit size and whether or not one will actually make a profit.
Bitcoin’s price has dropped from $20 000 to $6 500 since Dec 2017. If you had invested, your yield would have been -65%. Ethereum has lost about 80% of its value, while Ripple lost about 90%. Even crypto optimists are finding it difficult to find reversal signals.
Other risks of cryptocurrency investments include issuer defaults, the constant restructuring done by issuers, cyber-attacks and legal hurdles.
We therefore recommend that the digital currency market not be used for long-term investing, but for using intraday volatility to make a profit. A short-term approach will reduce external trading risks and will allow you to concentrate on local trends.