Picking a crypto market strategyby Alexander Zane Financial Analyst
If crypto markets are something you find yourself interested in, then understanding its influences is essential. Without understanding what makes a difference in the market, you will not be able to develop a sound trading strategy. These will be the indicators that will tell you where a certain cryptocurrency will end up.
Crypto market influences
First of all, we have to keep in mind that cryptocurrencies are linked to economies. These may be indirect links, but links nonetheless. Therefore economic news is very relevant to the performance of cryptocurrencies. For example, say the economy does particularly poorly in thanks to some major events. It is quite likely, in such an event, that their native currency or a common currency (like the dollar) starts to suffer. Traders all around the world will then start to panic and desperately search for somewhere stable to invest. This would ideally be an investment in an asset that would not be influenced negatively by said events. Most likely, this would be a currency that does not have direct ties with a country’s economy. Enter cryptocurrencies. A cryptocurrency will likely offer traders just what they are looking for. As more traders start to invest in these currencies, the prices will rise. Venezuela is a very salient example of where suffering economics means people turn to cryptocurrencies for financial solvency.
That is just one example out of many we could point to.
Political factors, as much as economic factors, can have a sizeable influence on a coin. Currently, cryptocurrencies are still being accepted by society at large. Even more so, they are still being accepted by financial institutions around the world. No one is yet aware of how to incorporate them into economies, or if they even should.
This means that cryptocurrencies still struggle to even be allowed for use in many countries. Places like Bangladesh, Bolivia, and numerous other locations, outright forbid the use of such currencies. Some countries, on the flip side, are more accepting of cryptocurrencies and are slowly introducing them into their financial systems. In much of Europe, cryptocurrencies have quite exciting prospects. Indeed, Europe is seen as the main center for cryptocurrency activity. Many German banks, for example, have certainly expressed interest in them, and say they intend to offer services in them in the foreseeable future. All of these sorts of factors can have a considerable effect on the health of the crypto market in a particular area.
Features of a cryptocurrency
Other factors to keep in mind are the features of the cryptocurrency itself. Cryptocurrencies have different features that are useful for different niches. No one cryptocurrency can capture the whole market, so they have to specialize. This means figuring out how in-demand their particular specialization is. Even more than that, it means knowing how well that currency fills that particular niche. If people feel attracted to that niche, then the prospects for its future value go up. This means keeping an eye on any software updates for the particular coin. Has its utility increased somehow? Have they made the coin safer?
Online crypto market discussion
Crypto markets really have their origin on the internet. These are the places where excitement over the capabilities of cryptos first took hold. It was only natural. Cryptocurrencies, being entirely digital, most likely have gained support from the digital realm. It is only relatively recently that cryptocurrencies have entered the mainstream discussion. As such, numerous online forums are where the discussion over most cryptocurrencies tends to take place. More specifically, forums like Reddit are the major hubs of crypto discussion activity. These places can have significant sway in how the crypto market moves. In fact, significant changes in a crypto coin often occur following greater activity in these forums. Therefore following what these sorts of places say can give one a reasonable glimpse into people's’ attitudes towards currency and the market at large.
There is a line of logic here that threads together all of these topics. The most important thing to keep in mind is that people are the ones who decide what happens in the market. Their reactions and attitudes towards a particular currency, emotional or calculated, is what counts. More importantly, the relevant target of a coin matter even more. A trader should disregard their own opinion over some news or event and instead consider what other people think. They should take advantage of the prevailing opinion, and not necessarily follow it blindly. This does, of course, depend on the traders’ particular strategy.
Common crypto market strategies
There are a few common strategies you can follow when it comes to the crypto market. They mostly scale with time scale and intensity.
The first is a scalping strategy. This is the most intense form of crypto trading and would mean keeping one’s eyes glued to charts all of the time. Trades happen over a series of minutes, and traders take advantage of every tiny opportunity that presents itself. This is the kind of trading that has low risk and needs lower funding to commit to. However, that does not mean that this is the type of trading for beginners. Trying to do so much in such small time frames can be overwhelming, especially if you are not highly familiar with how the market works.
From here we move to day trading. The intensity is lower, as trades take place over a few hours usually. The funds you need to commit do tend to be higher, however. Traders also tend to do a bit more fundamental analysis here, keeping an eye on the news.
Next, we have swing trading. This focuses on the sudden swings the crypto market may experience over a week. Again, this requires more funds, as the stakes are higher. What’s more, a greater focus on fundamentals is, again, required.
Position trading is the final one we will cover. This means considering the value of crypto over a long period of time, usually weeks or months. This is fundamentally about the long term. A trader doing this needs to figure just how valuable a cryptocurrency really is, not exploiting small fluctuations. This is the type of strategy that needs the most funding, as the losses are potentially the largest.
Created on Jun 12th 2020 06:48. Viewed 377 times.