If there is one word to characterize Bitcoin and cryptocurrency, it is volatility. Cryptocurrency values surge and appear to plummet nearly as rapidly as rumours, moods, and fundamental events are immediately absorbed into the market. Bitcoin dropped from $30,500 to around $23,500 in only four days in early June, a drop of roughly 23%. At the same time, Ethereum fell by more than 31%, and it appears that the whole crypto market has been falling this year. That volatility draws traders trying to profit, but it’s also nerve-wracking, especially for rookie investors just getting started. However, there are certain steps you can take, in order to profit from trading Bitcoins over Like this trading platform, even though markets are plummeting.
- Maintain your composure.
Whether you decide to trade your Bitcoin, or you think of price drops as opportunities to invest more, you must maintain your composure. It is important that you make judgements that are not emotionally motivated, as most emotional decisions lead to disasters. You must focus on the motive you had when you entered the crypto market, as that will provide more clarity regarding decisions that you can take during dips. It is imperative that your behaviour suits your objectives! If you are in the game for the long-run, you must trust your initial judgements, and expect the market to correct itself. If you are in it for the short runs, trust your instincts, calculate, and then decide. Maintaining your composure is key to having a good investor portfolio.
- Evaluate the situation.
Is the news driving the trading price of Bitcoin and other cryptocurrencies? It’s likely that fundamental information has impacted market mood and that it’s not only price movement or rumour influencing sentiment. Actual developments will harm pricing in 2021. China’s move to prohibit financial institutions from providing crypto-related services was a further step after the authorities banned cryptocurrency exchanges in 2017, albeit it had not stopped people from possessing cryptocurrency. TerraUSD, which was initially a stablecoin fell hard in the month of May 2022 when a vast number of traders took part in a well-known “bank run,”. This bank run was triggered by a fear of lack of crypto assets that are supposed to support its peg to the dollar. The news of the bank run spread like wildfire to other crypto exchanges, and traders started fearing that selling would compound this issue to additional selling. Thus, it is important for you to evaluate situations that appear to be on a slippery slope!
- Keep in mind that volatility is the name of the game.
Cryptocurrency is inherently volatile. Because cryptocurrency does not create cash flow, traders must rely on mood changes to move the price. That implies the market can swing from frantic euphoria in early 2021 to dismal despair a few months later. The uproar around the Coinbase IPO in 2021 contributed to a good attitude about crypto. Still, the decline in monetary stimulation contributed to pessimism towards the end of 2021 and the start of 2022. When you have an asset driven by sentiment, the market is propelled by the emotions of traders. This is also correct for stocks, but they may have a natural stream of increasing working capital from their issuing firm to propel them higher. This volatility seems lucrative to crypto traders that depend upon algorithms that are high-powered, to execute several transactions that are sophisticated in nature. Volatility is the generator of profits, in both the crypto industry, and other investments as well.
- Examine the future.
India has been considering banning cryptocurrencies, while the Russian central bank has also expressed objections. However, some governments, notably the United States, are looking into ways to regulate cryptocurrencies rather than simply forbidding them. El Salvador and the Central African Republic, for example, have made it legal tender. Now we wait to watch how other nations respond. Still, cryptocurrencies face significant challenges in the form of legislation, including laws that might effectively put them out of business. As cryptocurrency grows in popularity, it risks becoming a victim of its success. It doesn’t help that crypto is utilized in ransomware attacks and other illegal activity. As a result, crypto purveyors’ utopian visions may be legislated out of existence. Of course, political ramifications are only one aspect of their destiny.
Thus, as a trader, you must learn not to act out of emotions, but pure facts and market analysis. You must maintain composure while markets keep plummeting, and evaluate the cause of market events that manipulate Bitcoin prices, and predict how the market is going to react. If you want to keep profiting from trading Bitcoins, this is something you must excel at!
