Thursday, 06 October 2022 12:36

What is the Role of Volatility in Cryptocurrency Trading?

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Crypto trading is becoming increasingly popular because it allows multiplying your initial crypto investments in the short and long term. If you have deep knowledge of the market and understand how to access it, and if you have experience using a crypto platform, you will succeed in trading. 

One of the crucial things to analyze when building your cryptocurrency trading strategy is price. Traders use crypto charts to investigate price fluctuations, find historical parents, and see how prices change in different periods. The main feature of crypto assets which allows traders to receive income is high volatility. Let’s discuss what affects crypto rates.

Crypto Prices: Influence Factors

Unlike conventional money, cryptocurrencies are not controlled by the government. Central banks either can’t control crypto emissions and prices in any way. In crypto scope, there are other factors for prices:

  • supply and demand balance;
  • lack of regulation;
  • low capitalisation;
  • often, a few major investors hold most of the crypto coins, which gives them the power to manipulate the market.

The market sentiments are changeable. For example, if a few large crypto holders start to sell their coins in masses, it creates panic in the market and the asset’s price drops, and the market crashes. It works the same in the reverse direction. In such a way, supply and demand vary, creating huge market volatility. 

How to Avoid Panic During the Market Volatility?

To hedge risks during significant market fluctuations, traders buy stablecoins. Stablecoins are crypto assets supported by conventional currencies such as the dollar. Crypto exchanges offer different stablecoins, and the most traded is Tether. Its rate is always around one dollar. When the market starts a downtrend, many traders convert their holdings to Tether USDT, so they maintain the value of their investments in dollar equivalent. We recommend using the WhiteBIT crypto exchange, for it offers low transaction fees, robust security for users' accounts, over 400 crypto pairs, and all the tools for efficient trading - charts, calculator, bots, etc.


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