How to Leverage Cryptocurrency Volatility

Bitcoin is the first cryptocurrency that came into existence in the year 2009 and since then it has been on a remarkable journey. Bitcoin, and other cryptocurrencies, are volatile. On 17, 2017, bitcoin reached its all-time high value of approximately $20,000 and then its value plummeted. Since then, the value of Bitcoin has witnessed many ups and downs.

Even after major fluctuations, bitcoin is here to stay.

Here the matter of concern is what causes significant changes in the price of cryptocurrency. The highly volatile nature of cryptocurrency is what confuses crypto enthusiasts whether or not to venture into bitcoin exchange platform development.

Factors that make bitcoin volatile

Volatility is the driving force which drives crypto traders to play on the price fluctuations of crypto assets. The year 2019 was reported to be the most volatile year for cryptocurrency and there are tons of factors that led to the price movements.

Cryptocurrency is similar to traditional stock exchange and all the worldly events have a huge impact on the price of crypto assets. For example, Facebook’s announcement to launch Libra coin or a simple tweet of US president led to the surge in the price of cryptocurrency.

Other factors have a massive influence on the price of Bitcoin, including the following:

• Market immaturity

Cryptocurrency market is still in its infancy. Though 10 years may seem a very long period to some individuals, it is extremely short for an industry to gain a competitive positioning in the market. The market is still at a far to reach its full potential in terms of technology usage or utility. It is the immaturity of crypto industry, why it is still regarded as FOMO (Fear of Missing out) or FUD (Fear, Uncertainty and Doubt).

• Types of investors

Several cryptocurrency investors call themselves active traders, but still the market is not yet captured by institutional investors. The main inhabitants of crypto market are only retail investors. This is the reason the market is taking its pace to grow at a certain position and the volatility exists.

• Lack of regulation

The regulations in crypto industry are still at dormant stage. Although the security and regulatory measures have been devised, there is still a need for modifications along the years to come. Irregularities in regulations are also a reason why some investors are reluctant to enter the market.

Is volatility a serious problem or we can benefit from this scenario?

Regular technological improvements are taking place in the overall crypto market — be it in terms of bitcoin exchange platform development, or regulatory framework, or perception of users, everything is seeing a change.

It’s not that the stability of the market would invoke users to participate, but they require education on how to benefit from this situation. Investment opportunities are dependent upon industry market life cycle and each segment has various moments to gain profits; it all depends on the perspective and strategy formulation.

Hereby, it would not be wrong to conclude that cryptocurrency market is volatile. But what matters is how to leverage the volatility of cryptocurrency.

How to use volatility to your advantage

Volatility comes with an added risk. You have to more realistically and carefully access your strategies of how to deal with these situations. Cryptocurrency exchange platforms are integrating more and more features in their exchange to provide a comprehensive platform to crypto traders.

Following are the opportunities while building a crypto exchange:

• Margin trading

Margin trading is a feature that is very much in use in the traditional stock market and slowly it is also gaining its position in the crypto ecosystem. It allows users to leverage their trading position, enabling them to trade more while holding a less amount of cryptocurrency.

Though this mechanism may appear risky, effectively managing your leverage position could be potentially a safer option for you. It also enables quicker liquidation of assets.

One of the popular crypto exchanges to indulge in margin trading is BitMex.

• Buying bottoms

HODL is a strategy that all the people with positive aspiration yield on. HODL stands for “Hold on for Dear Life”. Investors following this strategy hold cryptocurrency for a longer time and wait patiently for their price to rise. Traders sell off their alt coins (at the time of higher price) for bitcoin. Through this approach, they accumulate more of bitcoin, as it holds almost 65% of circulation in the crypto market.

• Dollar cost averaging

Dollar-cost averaging is one of the most popular methods among the beginners and first time investors. It is also the safest option to invest as it works on creating a proper investment schedule and aligning with that schedule. In this, the same amount of money is invested over a set period, thus saving you from volatility.

End Notes

Factors that affect the volatility of cryptocurrency are dependent on the market conditions, some being man-made factors others being natural. Every year countless investors leverage crypto volatility and are a growing opportunity for you also.

If you are planning to build a crypto exchange, Antier can help. We harness our technical prowess and domain expertise to build a feature-rich exchange integrated with margin trading. To know more, schedule a free demo, or connect with our experts to share your business needs.