What is volatility?
You’ve probably heard explosives or someone with a hot temper referred to as volatile, but it has a much more regular use in finance. Volatility refers to how likely a given asset is to rise or fall in price based on numerous factors. It measures how far the price of a stock or asset can get from the median price. Volatility for stocks isn’t a subjective metric; it can be objectively measured by option pricing models and standard deviations on returns.
For cryptocurrency owners, the volatility of your assets is a crucial thing to keep in mind. Volatility essentially determines risk. Cryptocurrencies experience an unusually heavy amount of volatility that crypto enthusiasts don’t always appreciate. Remember that volatility also includes increases in price. Bitcoin and Ethereum are popular investment choices for a reason.
There are several ways to mitigate or even benefit from the volatility of crypto. Cryptocurrency bettors are no stranger to putting money on the line, and some can also boost their winnings by using cryptocurrency.
Digital assets and volatility
To understand how to take advantage of cryptocurrency, you need to know why and how volatility affects the crypto market. Many of the same benefits of crypto also cause its value to fluctuate. Anyone can purchase or mine Bitcoin, meaning the market is open to everyone at any time. Big purchases or sales are entirely autonomous and can single-handedly influence the market, especially for smaller cryptos like Litecoin.
There isn’t anything to back up cryptocurrency, making it much less stable than traditional legal tender or fiat currency. It's primarily driven by faith and public interest, though the usefulness of crypto has skyrocketed in recent years.
As a purely digital asset, cryptocurrencies experience more market volatility that an asset with a physical counterpart. The price of a stock market index changing by 1% over a day is considered a sizable swing. Daily 1% changes would be a quiet week for cryptocurrencies.
Media and government can drive volatility
Another significant factor driving cryptocurrency volatility is the lack of any powerful governing body. This puts cryptocurrencies at the whim of both the media and world governments. Both groups can significantly influence the rise and fall of crypto prices.
Media outlets still see cryptocurrencies as the wild west of finance. Their reporting on cryptocurrencies can be sensationalized, leading to investors overreacting to events. The media is also aware that cryptocurrency users, including bettors, are keen to track their currency’s value. Small events can be overreported, or large events can be misinterpreted. Social media can also amplify crypto volatility caused by the media.
The groundbreaking qualities of cryptocurrencies can also lead to government regulation. The Indian government has made several attempts to ban cryptocurrency within their country. Regulation like this can legitimately affect the value of cryptocurrency, but media representation can further magnify the impact.
Meanwhile, South Korea has widely adopted cryptocurrency usage and has even created a government department dedicated to overseeing its use in the country. News like this can cause gradual rises in the value of cryptocurrency as it becomes more useful. Just like with the media, government involvement can also raise the value of a bettor’s cryptocurrency.
Taking advantage of volatility
Now that you know volatility has a positive side, you’re probably wondering how to work around it. Savvy bettors have two options for dealing with the risk; either embrace the volatility or work to mitigate it.
Investors large and small try to sell their stock right before a dip in the market. This is called a short sell, as it allows them to make maximum profit. These companies can also rebuy once the stock has bottomed out to get more for less. You can do the same with your cryptocurrency. Purchase cryptocurrency when the price is low and deposit it into your betting account during a price spike. It requires a lot of attention, but you can truly maximize your winnings using volatility.
Keep in mind that volatility can also lead to some anxiety about correctly maximizing your cryptocurrency experience. It's important to remain disciplined and think of the long term when using crypto. Buying and selling cryptocurrency in a panic will assuredly lead to overall losses.
Another option is to look for a cryptocurrency suited for stability. Stablecoins are cryptocurrencies that are tied to real-world goods like gold and standard currencies. You can trade them on the blockchain and receive the same benefits as using crypto without the volatility. Keep in mind that that predictability comes at the expense of missing out on crypto price spikes, but in the long term, stablecoins themselves can also serve as a solid investment.
Once you make a deposit on Thunderpick with crypto, it gets converted to Thunder Coin. Thunder Coin is pegged to euro, where 1 euro = 100 Thunder Coins. This is similar to stable coins, therefore immune to volatile exchange rate fluctuations of cryptocurrencies. Once you make a deposit with crypto on Thunderpick, you don't need to worry about crypto volatility.