If every investment vehicle available on the market were listed in a catalog, the cryptocurrencies section would undoubtedly be the most exciting and risky. Swapping them daily or weekly adds a little more spice to this combination.
The crypto trader trading on coin-bits or any other exchange, can face a roller coaster of emotions throughout the day while striving for profit. And even if it is more than proven that the cryptocurrency market can be very profitable. Several players and circumstances play a role in their price, which makes them very volatile.
When trying to survive in the wild, wild west of investments
Whale is a term which is commonly used in the cryptocurrency market. It refers to investors that can manipulate the market due to the large amount of assets they hold.
Most crypto traders try to avoid markets where whales are very present. What are they scared of? As in the ocean, where the big fish eats the small one, the crypto market behaves in a similar way.
These large investors are constantly trying to increase their assets by taking advantage of individual investors.
2. Lack of volume for some pairs
Unlike other markets like forex, stocks or commodities, the cryptocurrency market is very young in comparison. The main coin, Bitcoin, is 10 years old. However, most of them are around 3 to 5 years old.
This insufficient maturity for many pairs results in a lack of volume in the less known and capitalized pairs. And since volume is the fuel of price movements and volatility, it makes them difficult to trade and very unattractive for any type of trader except one, the pump and the dumper which we will examine in the next point.
3. Pump and dump groups
Extremely illegal on the regulated markets, this type of “trader” has found a gold mine in the cryptocurrency market. This is another way of manipulating the market which consists in artificially pumping and then emptying the price of a part to take advantage of the increases.
These pumps are not manufactured by a single investor, they are manufactured by large pumping and emptying groups where the investors agree to buy a specific part with low capitalization at the same time. These groups can increase the value of a coin by up to 500% in some cases.
4. Insider trading
While in every existing market, all of the information that could affect price behavior and industry development must be public, the crypto market, again, is slightly different.
Since it is not a regulated market, players with inside information or insider trading can take advantage of their opportunity to benefit greatly.
Common examples are people working in large exchanges which also includes Coin-Bits. But, whenever exchanges like Binance or Coinbase add a new cryptocurrency to their platform, its value skyrockets. It can easily be multiplied by four, and people working in these companies know this, which changes the price even before the announcement.
5. Restrictive regulation
Are the regulations good? Yes, it is. Can it change the development of the cryptography industry? Of course, for better or for worse. Will it be represented in the graphs? Without a doubt.
Cryptocurrencies are still a very recent technology. Given their particular nature for which they are somewhere between a currency and an asset, it is quite difficult for regulators to frame them in existing regulations. Therefore, they must determine what role they will play in our economies.
Since something as important as the rules of the game is not yet defined, once they are implemented, it could significantly affect graphics. To the point where they could cause an earthquake if it turned out to be very restrictive for them.