• Tue. Jun 25th, 2024

How to Profit from the Volatility of the Cryptocurrency Market

Barry Douglas

ByBarry Douglas

Jun 19, 2023

The world is fast moving in a revolutionary period. Despite all the talks of regulations and new controls, it is clear that the cryptocurrencies are making their way into the economy stably. The pace might be slow when you compare it with the pace of how smartphones spread around the world, but it is satisfactory nonetheless. People are looking forward to a time when they will be able to travel with just digital wallets and will not need any physical wallets or plastic and paper money. All the money they own will be stored in an online world or their offline devices.

However, that’s not the only thing that interests people around the world in cryptocurrencies. The biggest point of interest is by far the opportunity of investment. Those who were skeptical about the whole blockchain thing in the past realized later when the values of currencies like Bitcion and Ethereum went up by several hundred percent. The biggest problem for someone considering investing in cryptocurrencies is the volatility of the market. Cryptocurrency market is probably the most volatile financial market to exist today. However, volatility of the market is not a bad thing per se. Yes, you do need some courage, presence of mind, and careful trading to ride the wave and benefit from it.

Is the Cryptocurrency Market Really Volatile?

The first thing that needs to be established is the volatility of the market: is it truly volatile or not. Volatility is more like a measure of how much a financial market moves. That how much includes how frequently and by how much margin. You will say a financial market is volatile if it goes up and down extraordinarily in any given duration. It could be any financial instrument i.e. currency pair, commodity, index, cryptocurrency etc. So, is cryptocurrency market really volatile?

The truth is a simple yes. Cryptocurrency market is volatile, more so because of its newness. The market is still new so even the smallest factor can affect it quite a bit. A mere rumor about some kind of new regulation can send the soaring market plummeting downwards. At the same time, the announcement of the acceptance of a cryptocurrency by some bank can raise its price too. You can take a look at some statistics to be sure that volatility is a staple of the cryptocurrency market as of now.

Take the example of XRP that literally showed an increase of 28000% in its value in just the previous year. Bitcoin is no exception to such spikes and nosedives as well. In fact, Bitcoin remains one of the most volatile cryptocurrencies out there. Did you know it has shown a movement of up to $3000 in only one day in the past?

If you only focus on Bitcoin, the cryptocurrency had quite an interesting year. It kept the investors on the edges of their seats for the whole year. If you don’t know, Bitcoin was trading at $1000 at one point at the start of 2017. Within the same year and toward the end of it, the digital coin had gone up to about $20,000. The up and down movement is a characteristic of the Bitcoin. The overall price gains for Bitcoin in the year 2017 were nearly 1500%

If you think that’s high volatility, you need to look at the price movement of Ethereum as well. Ethereum remains the second biggest currency on the blockchain after Bitcoin. When 2017 started, Ethereum was trading at only $7. By the mid of January 2018, Ethereum was trading above $1000. That price point might not seem as big as that of Bitcoin, but it should not surprise you after doing some basic mathematics that Ethereum increased in value much more than Bitcoin. In 2017 alone, the cryptocurrency saw a gain of around 10000%.

From the statistics on some of the biggest cryptocurrencies of today, you can tell that cryptocurrency market is volatile and that you need to know the tips and tricks to take advantage of such volatility of the market.

How to Profit from Cryptocurrency Market Volatility

Go for CFD Trading

You have many ways of trading today. In the past, you had to own the stock of a particular commodity or asset before you could trade it. In fact, in the stock market, when you buy the shares of a particular stock, you are owning that percentage of the stock. After that stock has become your ownership, you have to wait for its price to go up so you can benefit from it. If you think the price of the share of a particular company will keep going up and remain stable, you could hold on to those shares for as long as you want. However, CFDs provide you with a better way of trading.

When you trade CFDs i.e. Contracts for Difference, you don’t have to own the underlying asset to benefit from its trade. All you are doing is more like placing a bet on the future price movement of the asset. So, you can go long or short based on the direction you expect the price to move in. If the price moves in the direction you predicted, you will sell or purchase the contracts to benefit from the fluctuation. At no point during the trade do you own the stock. You are only exchanging the contracts to own the stock with another trader.

So, when it comes to trading cryptocurrencies, it is best that you look for a platform where you can trade digital currencies in the form of CFDs. Rather than owning a lot of Bitcoins and seeing them depreciate by several thousand dollars, you should trade CFDs and keep your risks as low as possible.

Take Advantage of the Leverage

One of the ways to take advantage of cryptocurrency market volatility is leveraging the trade. Almost any online broker that lets you trade cryptocurrency CFDs will offer you some sort of leverage as well. The leverage is there to help you control that are otherwise not controllable based on the amount of money you have in your trading account. When you have leverage of 1:5, 1:10 or 1:100, you can control trades that have a volume much bigger than the funds in your account. Any price movements in the market are going to increase your profits by a great margin as well.

However, you have to be very careful with leveraging. It is a double-edged sword as the expert traders like to call it. It magnifies your profits just like it magnifies your losses. So, if you fail to make a profitable trade, your loss will be quite huge due to the leverage as well. If you are still in two minds, you should choose a small leverage wherein you can bear the loss too.

Try the Stop Loss Techniques

If you research online brokers, you will find out that they have all the necessary tools to help you make safe and profitable trades. While safe and profitable trade depends on a lot of factors, these brokers do their best to minimize your risks as much as possible. One of the ways they have to minimize your risk is by giving you access to the stop loss option. Stop loss option is when you can define a trade exit point before even starting the trade. You can define a point that you don’t want the price of a cryptocurrency to go below.

So, you can take an imaginary trade wherein a cryptocurrency is trading at $10. You buy the contracts and wish to sell them back at a later time when the price goes up. Let’s say you are expecting the price to be at $11 after one day. However, you also want to minimize your loss, so you set up a stop loss point as well. You set the $8 price point to be your stop loss. When you schedule this trade, your CFDs will be sold in the market automatically as soon as the price is $8. That’s because if you don’t execute a trade at that point, it could go down further e.g. $6, and end up being a huge loss for you.

And since cryptocurrencies can move wildly in any direction, you should take advantage of such options before you trade.

Use Social Trading Option

If you are not too sure about your trading skills, you should not worry because there are many solutions to that problem today. The best solution that many brokers make available to their traders is social trading. You must keep in mind that not every broker will provide you this option. In fact, some trading platforms do not even have this option on them. In social trading, you can copy the trades of professional traders in the market. So, you can see what a professional trader is doing and mirror their trade in the hopes of benefitting just like them.

The good thing about today’s trading platforms is that you can automate this option as well. You can define certain criteria for the trade to execute automatically. All you have to do is monitor your trades and intervene if you think the trades are not going in your favor.

Take Advantage of Diversity

That’s something you will hear from almost every investor in the world. One way of making your trading profile worthwhile is adding diversity to it. Diversification can mean a lot of things but in this context, you want to trade different types of cryptocurrencies. You don’t want to trade all your money on one cryptocurrency. You have many digital coins available for trading today. Bitcoin is only one big name. Other big currencies that you can trade on the market include Ripple XRP, Ethereum, Bitcoin Cash, Stellar, etc.

Why you want to do this is because cryptocurrency is not just one unit if you look closely. You have to come out of the impression that if Bitcoin is going down then all of the currencies have to go down. Take the example of EOS, While XRP and Bitcoin Cash were going down on the price charts in the recent months, this currency was climbing in value. Its upward trend continues to this day. On the other hand, you have Monero. It might not be the biggest cryptocurrency on the market but it has some unique characteristics. The best quality of Monero is that it stays stable much more than most other cryptocurrencies.

So rather than putting all your eggs in one basket, it is best that you diversify your investments.

Stay in the Know

Of course, the most important thing that a trader has to do as part of the financial markets is stay in the know. You want to stay in touch with online news websites, especially those that cover cryptocurrencies and blockchain news. You want to stay on top of what is going on in the market. You also have to know what information is important and what you can ignore easily. For example, when it comes to cryptocurrency regulation, you can’t ignore any news that comes from the US, Canada, Korea, Switzerland, Australia, etc.

In a similar way, you should follow the cryptocurrencies closely that you are investing your money in. You want to know what the developers of the cryptocurrency that you want to trade are doing at any given moment. If they are working to form new partnerships, launch new products, etc. you have to know the dates of those events. Such events and their news will always result in price hikes.


In the end, it is important to understand that regardless of the market conditions, your risks are always there. Even if a market is non-volatile, you cannot guarantee that your trade is going to benefit you. A volatile market might seem like a sea with a storm. However, you can use the winds of the storm to take you faster in your desired direction. Not to mention, a volatile market is better than a non-volatile market in more ways than you might realize.

Barry Douglas

Barry Douglas

Barry Douglas, a seasoned online trading expert, enriches Big Trends Signals with his extensive industry experience, writing insightful guides and comprehensive reviews to assist traders navigate digital markets.

Leave a Reply

Your email address will not be published. Required fields are marked *

Skip to content