Understanding Healthy Market Volatility

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Extreme market volatility often has a negative association because it conjures up images of market chaos, uncertainty, loss, and panic. But what happens when prices go from highs to lows? This is considered a sign of volatility. In fact, there are times when markets experience significant price fluctuations over short periods of time. These types of moves are called “extreme volatility.”

The good news is that with financial markets, extreme volatility is quite rare. Indeed, according to data compiled by Bloomberg, extreme volatility events have happened less than 2% of the time since 1926. However, one thing that does seem to correlate with extreme volatility is the occurrence of major economic shocks. For instance, the Great Depression, the 1987 stock crash, and the 2008 Financial Crisis saw dramatic declines in equity prices.

In addition to being rare, extreme volatility isn’t necessarily a bad thing. Rather, it’s actually part of how markets function. Investors and traders react to information and news developments, and those reactions cause price changes. So, even though extreme volatility doesn’t always mean risk, it does signal potential opportunities. And that’s why it’s important to understand the difference between extreme and moderate volatility.

Equity, Liquidity, and Crypto Volatility

Startup equity is a core concept within entrepreneurship. In fact, it’s so important that everything from a venture capital investment to an ownership stake in a software company falls under that umbrella. Traditional startup equity has one big problem: there’s no liquidity. You can’t sell your shares in a company like you might buy a house or a car. If someone wants to pay you money for your shares, they’re stuck paying whatever the market price happens to be. This makes it difficult to know what your investment is worth, making it harder to determine whether you’ve gotten a good deal or not.

Crypto offers a solution to this problem. A crypto token can start trading right now, often before the function the token represents is actually live. And unlike traditional startups where investors are buying shares in companies they haven’t seen or heard about, those investing in crypto tokens already see how many tokens they’re getting. So they can make sure they aren’t overpaying. They can also set up a price floor for their shares, meaning they’ll never lose money.

The downside is that crypto tokens are volatile. Unlike stocks, which trade on exchanges that provide price discovery, crypto tokens trade on decentralized networks where everyone gets a say in setting prices. This means that if people want to sell their shares, they could potentially push down the price.

Are There Ways to Reduce Crypto Volatility?

Volatility isn’t always a negative thing. In fact, it can help certain types of crypto investors. But it can also cause problems for others. And while the cryptocurrency market has seen significant drops in recent months, many market participants still see crypto as an option to consider in addition to traditional markets.

For those looking to take advantage of crypto’s potential upside without worrying too much about its volatility, there are ways to mitigate that risk. One strategy involves buying coins at different times, rather than holding onto them for long periods of time. This process is known as dollar-cost averaging.

Another way to manage volatility is to use what are known as stablecoins. These digital tokens are pegged to fiat currencies like the US Dollar, making them relatively safe from wild price swings.

Stablecoins include Tether, TrueUSD, Paxos Standard Token, Gemini Dollar, Circle USD, Dai, and Basis.

There are also newer options, including USD Coin, which launched earlier this month. Like most stablecoins, it’s backed by dollars held in reserve accounts. However, unlike traditional stablecoins, it uses blockchain technology to ensure that the reserves backing it actually exist.

Of course, no matter how you choose to approach investing in cryptos, there’s one thing you shouldn’t do: try to predict future prices. Volatility is one of the things that makes crypto unique. If you want to make money off of crypto, you need to accept that it’s unpredictable.

Trade vs. “Market Timing”: What’s the Difference?”

The stock market moves up and down every day based on news events, economic data, corporate earnings reports, and many other factors. But there are some traders who aren’t interested in trying to predict what the market is going to do next week or next month — they’re looking for trades that will pay off even if the market goes against them. These types of investors are known as swing traders because they trade short term.

If you want to find out how to become a successful swing trader, it helps to understand the difference between trading and investing. Traders look for stocks that are poised to move one way or another. They buy low and sell high, hoping to capitalize on small movements in prices. Investors, on the other hand, invest in companies that they believe will continue growing over time. While both approaches have value, swing traders tend to focus on finding profitable trades while ignoring the overall trend of the market.

Provide Liquidity

The crypto market is still volatile, and there are many players trying to make money off of it. One way to do this is to provide liquidity — meaning, you buy low and sell high. This strategy allows you to earn a cut of every transaction fee. You can even profit when the price drops. However, the opposite is true, too. If the market gets really hot, you could lose money. But if the market cools down, you might end up making some cash.

The Good News About Bad News

Cryptocurrency is still very much a nascent market, and many people are just starting to learn about it. In fact, according to one survey, less than half of Americans know what cryptocurrency even is. And while there are plenty of scammers out there trying to take advantage of newcomers, most of those scams don’t work because they’re transparent.

There are some projects out there that do try to hide the truth behind their ICOs, but they usually fail miserably. For example, one project raised $1 million dollars in under 30 minutes during a presale. They promised investors that they’d give away free tokens, but once the sale began, they didn’t actually hand over anything. Instead, they simply disappeared.

In general, though, the vast majority of fraudulent projects are exposed quickly, and the public learns pretty fast whether something sounds too good to be true. So far, no one has been able to pull off a successful scam in crypto.

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