Cryptocurrency

Cryptocurrency volatility, volume and liquidity

Volatility: liability to change rapidly and unpredictably.

Volume: the amount or quantity of something, especially when great.

Liquidity: describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price.

Cryptocurrency volatility is certain, fluctuates quite a bit and it scares many investors, when compared to consolidated currencies existing today.

Volatility may be erroneously seen as a high risk, leading investors to MIA.

But it cannot be confused or automatically treated as a risk.

Risk is the potential of an investment resulting in permanent loss of capital, reflective of fundamental analysis.

Volatility is a temporary fluctuation of price.” — Takota Asset Management

Volatility could be correlated with a risk, but not necessarily attached to it.

Risk is a certainty of a downfall, continuous; volatility is a constant move in price, up or down.

So, if a crypto starts showing a constant downward price movement, bearish as we call it, then yes it might be at risk.

The level of volatility seen with cryptocurrency is something that keeps people on the fence, because of the cryptocurrency´s entirely new concept.

We have been trading for centuries and never before have we, in a generalized way, cared about understanding how any of this worked.

  • How long have people been using fiat or their local money?
  • Do they know why they use the local money they use?
  • Do people know why their cash carries the value it carries? Who or what gives it its value?
  • Do they know the mechanism of the money they carry in their pocket?
  • How long have people been trusting banks with their eyes closed, without questions?

But then cryptocurrency showed up.

It brought forth all levels of questions and skepticism, now all of a sudden regular people want to understand what money is, how fiat works, how banks work and everything around it.

And that is good, people should be questioning.

Now, regular people are interested in the mechanism of banks, money and it´s all happening because of cryptocurrency.

Economic Growth starts when the general public gets behind it.

Some believe the failure of cryptocurrency is a sure thing. But even if that was the case, what cryptocurrency has already brought to the table, even with all its imperfections, it is already a success story.

From the technology it has presented, along with the blockchain ecosystem to all the desire of knowledge it has sparked in people, Mr. Nakamoto should be very proud by now.

Back to volatility…

The level of volatility cryptocurrency is going through is an organic process for all new “currency” systems. Inevitable bubbles and pops, highs and lows that are more than expected, it is just like any other store of value or medium of exchange.

A cryptocurrency expert Andreas M. Antonopoulos said something that explains volatility in quite simple terms, he said something like this:

Think of cryptocurrency as a boat, the smaller the boat the more turbulence, the bigger the boat the less turbulence. It would take really large waves to move a larger boat, but with a small boat any small wave or sea movement will make the boat move in some direction or out of place. Yes?

The concept here is that cryptocurrency is still a small boat for being a global currency, when compared to other currencies.

Partially, due to the low volume and liquidity, you might see it at one price today and wake up to a 30% price fall (or price rise), and that is totally normal and expected in this market.

Altcoin volatility seems to follow the mother coin´s price movement, right? Even though, a correlation seems illogical.

The answer might be in understanding human behavior, and the markets psychology.

One clear reason why we see a domino effect whenever Bitcoin bleeds, is that people PANIC.

Fear breads fears and the less experienced desperately start selling their coins.

The market fills up with a thick fear and naturally causes the downfall of many coins.

The stock market´s behavior is based upon human behavior; trading strategies are born out of these behaviors, aka fear and greed.

And the cryptocurrency market is no different.

This might be helpful to you “TO INVEST OR NOT TO INVEST”.

As the currency grows, more investors come in, generating better volume and liquidity, the BOAT WILL GROW and become less volatile.

Cryptocurrency is a new concept which you cannot invest any more than you can afford to lose. Doing this will also assure you some peace.

Your emotions cannot follow the volatility flow. Oh no.

Stepping into this industry well educated is the way to go.

Cut off the misconceptions by studying the market and understand that volatility is not an indication of direction but of movement.

Stabilizing this currency is the main goal at the moment, and it can only happen as more and more people believe in it.

As we open new paths to better liquidity and as we generate more everyday use for these coins, skyrocket the volume, we will see the needed growth until it stabilizes.

More liquidity + higher volume = less volatility.

May sound easy but generating liquidity is a challenge as of right now, as the mechanism to exchange fiat into crypto is a hassle, and it could take days.

Also, the market is still small enough it can easily be manipulated by whales, so we may be a long way from trading at a faster pace without affecting much of the price.

Cryptocurrency communities like Winco, are working hard, doing their part to come up with solutions to solve the low liquidity issues, and bringing growth to the cryptocurrency communities.

Winco is also focused on creating paths for non-digital small, medium and large businesses to step into the cryptocurrency world and generate higher volume.

As of right now, many investors are choosing to HODL because it seems like the wise thing to do in a volatile industry you believe in.

You have understood that volatility is not necessarily deadly, and chosen to believe in the future of cryptocurrency technology.

So, hodling just might be a good idea for some.

It might help with the anxiety.

When you choose to hodl a particular coin, you buy it, and put it to the side as an investment, as a store of value. And you let it be.

Take a look at this blog post: “TO HODL OR NOT TO HODL

Volatility is measured by percentage, and whichever percentage the index gives you on any particular coin, it basically means that the market may go up or down that % in the future.

Takota Asset Management says if ETH is at 20% it means in the future it has 70% chance of going up or down 20%.

To keep track of cryptocurrency volatility take a look at SifrData.com.

What are your thoughts about the cryptocurrency volatility?

What would be your ideas to solve the liquidity issues?

We would like to hear from you, let us know in the comments.

The Winco Team

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