Module 2.0.0. Nature of the Crypto Market
If you desire to make profits with your crypto investment, then you need to understand the nature (characteristics) of the Crypto Market.
The following are three characteristics of the Crypto Market:
1. Volatility
The Crypto Market is very young, hence, the prices of cryptos easily change whenever there is a large volume of trade.
A crypto whale is any person that owns a large amount of a particular crypto. If such a person decides to trade with his huge sums of money, any single large transaction will definitely shake the market price of the crypto a bit.
In the early years, the price of Bitcoin was known to move from 18000 USD to 1000 USD within few days, causing panic among traders. Such wide fluctuations were often due to the activities of these crypto whales.
This is especially true if the massive trade involves Bitcoin. Since Bitcoin still retains market dominance, once its price goes down, the prices of virtually all the altcoins will go down as well, and the reverse is the case when the price of Bitcoin goes up. Hence, the price of Bitcoin has been used as a determinant to predict the price movement of all other cryptos.
However, this Bitcoin-dependent price movement of altcoins may not last too long as Bitcoin’s market dominance gradually weakens and more and more capital flows into altcoins.
What this means is that you can easily lose all your money and at the same time easily make huge financial gains from the Crypto Market.
Caution: It is financial wisdom not to invest the kind of money you cannot afford to lose in the Crypto Market.
2. Continuous Innovation
The Crypto Market has become the most dynamic of all markets after just about a decade of existence, witnessing continuous innovations.
These innovative changes are in two main areas:
(a). Trading platform
This has grown quite rapidly to produce two market systems – centralised and decentralised, as mentioned in Class 1 Module 1. The trading platform is still innovating and expanding.
(b) Articles of Trade
The Crypto Market is currently witnessing an exponential increase in the number of cryptos, the articles of trade, and this is adding variety, colour and dynamism to the market.
In fact, about 5 cryptocurrencies are birthed every week since the beginning of 2021, resulting in more than 12,000 cryptos in the Crypto Market.
3. Scams
Indeed, the Crypto Market is very young and moving very fast. Many people only hear of the wealth being made from the market and blindly plunge their hard-earned money into it. As such, individuals with low morality and no conscience have moved in to defraud such crypto investors.
There is a lot of hi-tech scamming that swarms the Crypto Market. Be warned!
How do you protect yourself against such scamming? The answer is: Educate yourself about cryptos. The more you know, the less likely you will become a victim of scams.
Scams are often common during the first three phases of any innovation (See Grade 2 of the Primary School of Cryptocurrency). Scams negate the good innovative capacity that cryptos have brought into this digital age.
Controlling scams is one of the reasons government regulators often cite for interfering in the affairs of any innovation. The good news is that, like it has always been, scams will wane off as the Crypto Market matures and more people become aware of the way the market operates.