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Are you wondering how you can make the most of Bitcoin volatility? Here is a detailed article on how you can make the most.
Volatility is a term used to refer to rapid price movements in the value of any asset, including Bitcoin. The price of this digital currency has frequently moved upwards and downwards within the day by between 5% and 15%. Also, the volatility of this digital currency is measured by sampling how far away the price of the coin behaves from where it was from a specific point in time.
People use numerous factors to explain why the value of this digital currency is volatile such as social media and demand and supply. Here’s what you can do to make the most of Bitcoin volatility.
Diversify Your Portfolio
Investing too much in a single cryptocurrency doesn’t pay. Most savvy investors hold several different kinds of assets long-term to diversify their portfolios with various investments. Spreading your holdings among digital currencies, stocks, shares, and other assets is vital. Generally, don’t invest more than 10% of your funds in one sector. Instead, spread out your investment which, on the other hand, does not mean that you are over-exposed because you are not.
When investing in crypto, you as an investor must stick to some of the top coins by market capitalization like Bitcoin or Ethereum. In the end, you do not risk being over-exposed should one the decreases in value, mainly because the market value of this digital asset is highly volatile. Should you decide to diversify your portfolio and something exciting to talk about, check the bitcoin code website.
Be Prepared
Always stay informed and up-to-date with everything regarding the crypto market because you might come across an announcement from a high-profile individual that will tell you about volatility. As a result, you must plan and take steps to ease your losses should some sudden crash occur.
Do not be a Victim of FOMO and FUD
Speculation about price movements plays an integral part in the value of this digital currency at any given time. Also, most people have come across the term FOMO which means fear of missing out. FOMO in the crypto space applies to beginner investors who always want to stay on top of the latest news and trends. Ultimately, they fall prey to FOMO, allowing their emotions to take over and causing them to buy at the top or make poorly timed trades.
On the other hand, FUD, fear, uncertainty, and doubt are the opposite and can be equally detrimental to sensible crypto trading. Negative rumors and social media posts by influencers and celebrity Bitcoin fans father news articles about a particular asset or market can negatively impact traders and force them to sell their holdings, which usually leads to a sharp reduction in value.
Bitcoin volatility is at its highest during FUD and FOMO, and beginner investors tend to lack an understanding of what causes volatility in this digital currency. As a result, one should learn and analyze the markets wisely and remember why they opted to trade this digital currency.
Arbitrage
Arbitrage is the practice of purchasing this digital asset at one price and trading it at a premium cost on another marketplace. The Bitcoin market is uncontrolled, enabling one to start an interchange. So, to begin an income stream, open profiles on marketplaces where you anticipate this digital asset will have drastically different values. When trying arbitrage, dealers need to consider trading costs additionally.
The Bottom Line
The truth is even the most experienced investor cannot predict the future of this digital currency. Also, trading this digital asset is a high-risk investment due to how volatile this digital asset is.
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Disclaimer: Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite. TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
