The crypto market has not been dominated by institutional investors. This market, in comparison to other markets, is relatively new. Cryptocurrencies are highly volatile, nonetheless, people still have great interest in them. The high risk associated with the crypto market cannot be overemphasized. For seasoned traders, the market can be a paradise.
The crypto market is a profitable market to trade. Some of the reasons why it is a profitable market to trade include:
1. Crypto is a free market
In the crypto market, anything goes. There is no central authority governing the operations of the crypto market; it is an unregulated market. Although there are downsides to an unregulated market, the advantages are much higher. For example, there are no circuit breakers to interrupt trading when prices go south.
In the crypto market, things play themselves out when there is a crash. Unlike the traditional markets that have cool-down periods during major sell-offs, the crypto market runs 24/7. The crypto market is a free market and free markets tend to have cleaner price patterns for trade analysis.
2. The crypto market is not dominated by high-frequency supercomputers
Supercomputers are capable of running high-frequency algorithms that will allow trading in a matter of microseconds. Because of the processing power of these computers, large investment banks use them to gain a competitive edge over other traders.
For retail investors who are just trading from their home computers, it is not easy to compete with these large investment banks due to the difference in processing power of their computers.
High-frequency supercomputers can be used to manipulate the system, favoring only large investment banks or firms that can afford them. However, the crypto market is not dominated by these computers and so, retail investors can still make lots of profit from it.
3. The crypto market is driven by “dumb money”
“Dumb money” is simply a technical term that is used to describe traders who buy and sell investments at the worst possible time. These traders buy when prices are high and sell when prices begin to decline.
The “dumb money” group chases the market emotionally; they buy when prices spike for the fear of missing out and sell at a low price when the market crashes. In the crypto market, there are amateur traders who make emotionally impulsive trades. These traders can be classified under the “dumb money” group.
The crypto market is driven by “dumb money” and markets that are driven by “dumb money” are known to be more volatile and easily predictable for those who know what they are doing.
4. Quick settlement and arbitrage
Settlement time for buying and selling stocks can be delayed. But for cryptocurrency, blockchain technology, the underlying technology on which most cryptos are built, makes the settlement time faster; it speeds it up to just a few seconds.
The price of cryptos is not determined by any crypto exchange and so, there are usually discrepancies in the market. The discrepancies in the crypto market sometimes lead to arbitrage opportunities; traders can buy cryptos on a particular exchange and sell at a higher price on another. However, what determines the price of cryptocurrency is based on the users.
The crypto market is a profitable market to trade. It can bring you lots of profits if you know what you are doing. Before jumping into the market, make sure you understand how it works. An understanding of how the crypto market works will help you make correct decisions.
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