Why volatility is a good thing

To say that the price of bitcoin and other cryptocurrencies has been volatile would be something of an understatement.  The price of Bitcoin especially has skyrocketed on some days and crashed and burned on others. Losing 30% of its value is a regular occurrence, it’s not something to be feared as it usually recovers within a few days and the upward trajectory seems pretty likely.

It is however a somewhat of a newbie mistake to panic when the price starts plummeting, this is been demonstrated on various websites like Coinbase which is frequented by a lot of newbies who have got into Bitcoin because of the rising value and FOMO (the Fear Of Missing Out) without really understanding what’s going on. They jump in buying $5,000 worth of Bitcoin and then panic when the following day the value of Bitcoin halves over 20 minutes. They panic and jump onto the Coinbase website and attempt to sell their holding before they lose everything. This causes a couple of things, firstly it makes the price drop even more and secondly it causes Coinbase to almost grind to a standstill because the volume of traffic has gone up 100 fold of its usual volume.

volatility shows the range of highs and lows

It is of course this volatility that causes certain commentators to complain the Bitcoin is just a bubble and will burst any time soon, on the other hand it’s also this volatility that allows some of us who actively manage our Bitcoin holdings to make even more profit. As the best time to buy Bitcoin is when the price has dropped by 30% because when it recovers to what it was the day before the price will have gone up by nearly 50% giving us a solid 50% profit.

Of course there is always the slight nagging doubt that some have that this whole thing may really just be a bubble and go pop at any point. But this goes back to my point – never invest more than you’re prepared to lose! If you’ve made a good percentage, take out some of the cash you put in and put it back into your savings account. At some point soon you’ll be using just the profits you’ve made investing in cryptos, even if does bubble pop, you won’t have lost any ‘real’ money!