If you are going to trade in cryptocurrencies, look at what distinguishes them from other assets.
Active reaction to the news
At the moment, various news and events are the main factors influencing the rate of cryptocurrency. One positive news or even a short tweet can cause a cryptocurrency to rise several times, and similarly, negative news can bring down the course or launch a long-term deep correction. For example, John McAfee mentioned the XVG coin in his twitter, and XVG price has grown 50 times in a few days.
The difficulty is to quickly find the necessary news and correctly assess their impact. To do this, you need to have an understanding of the overall picture in the cryptocurrency market and in the blockchain industry, as well as regularly following the news. The best way to track news is to use Twitter and Bitcointalk.org.
Hacks
Surely you have heard about hacking into cryptocurrency wallets and cyber attacks on cryptocurrency exchanges: systematic hacking of Mt.Gox, theft of NEM with Coincheck, hacking and theft of bitcoins from the crypto-mining market NiceHash. The more popular the cryptocurrencies and the higher the capitalization of the cryptocurrency market, the more the interest of intruders to them.
Unfortunately, no service can guarantee you complete security, but many exchanges have a complex security system, so it’s very difficult to hack into them. The security of your account on a cryptocurrency exchange largely depends on what actions you take for your personal security.
High volatility, low liquidity
The capitalization of the cryptocurrency market today is approximately 123 billion, Bitcoin alone is $ 67 billion. There are more than 2000 cryptocurrencies, and many of them are being traded at several exchanges, so there are many cryptocurrencies on various trading platforms, the course of which is fairly easy to move significantly for one player.
For example, on Poloniex, a fairly large and well-known stock exchange, for the Augur (REP) rate drawdown, the cryptocurrency in the top 50 by capitalization, by 50%, there are only about 12 thousand dollars needed:
Probably, the course will quickly return to the previous value, but such a scenario is not unrealistic. If you decide to trade on cryptocurrencies, you should be prepared for such incidents.
Therefore, technical analysis and strategies based on it do not always work well for cryptocurrencies: these tools emerged and were refined in a market where the crowd psychology works stably, and one player cannot significantly influence the course.
Pumps and dumps
Pump and dump is a sharp price movement up or down, respectively. Public sources or even paid chat rooms publish messages calling to buy some cryptocurrency on a particular stock exchange (as a rule, a little-known coin with a low capitalization). Messages about the purchase can be supported by fake news, pictures with technical analysis, estimates of “experts”. The pumps organizers first buy the coin, then announce the pump and sell the coin at an increased price.
With a very lucky set of circumstances, you can earn money too, but usually pump participants lose money: after a sharp increase in demand and a rise in price, demand returns to the previous level, and the offer grows (as the pump participants want to exit), and the cryptocurrency rate returns to the previous level. As a rule, everything happens in a matter of minutes. Even after that, the pump can be repeated: the participants of the first pump, who did not have time to sell the coin, publish calls to buy cryptocurrency and try to raise the course in order to exit the transaction with a profit.
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>> This is only the first part of this educational article, to continue reading you should wait for the second part in the coming days. Thanks for your attention. #twim team
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