Trading lessons. Bitcoin Plunges, is it the same as 2017?

Here we go again.

I will be the first to admit that I didn’t invest in crypto’s at the beginning an often doubted my reasons & scepticism as we saw an unbelievable acceleration in their prices over the past couple of years.

Glancing enviously at Bitcoin investors when it headed towards 60k. I always advocated that I would rather trade the volatility which in unprecedented for an asset class offered by most brokers on their online platforms.

Today, as always, the headlines are causing another massive movement, this time downwards.

Last week Elon Musk, questioning the environmental impact of mining for the coins.

Recently, Bank of England Governor Andrew Bailey said Cryptocurrencies “have no intrinsic value” and people who invest in them should be prepared to lose all their money.

And today Bitcoin and other major cryptocurrencies slumped after the People’s Bank of China conveyed a statement reiterating that digital tokens can’t be used as a form of payment.

The largest token fell below $40,000 for the first time since early February, dropping as much as 10% to $38,973 on Wednesday.


On the other hand! Whatever the future, brokers and their clients want to get involved.


Saxo Markets as an example, has launched a cryptocurrency offering enabling clients in select markets to trade Bitcoin, Ethereum and Litecoin against the dollar, euro and yen from a single margin account.

Saxo Markets APAC Chief Executive Officer Adam Reynolds said in an interview saying that there’s been “strong demand” for this and it’s going to be launched progressively in different countries over the next few weeks.

“The active trading clients are going to be the ones most interested in this,” Reynolds said, “and that will include people who are active traders in FX, but also people like active traders in tech stocks.”

Traditional financial companies have been flocking to the maturing cryptocurrency space in the past year as offerings multiply and prices rise. Goldman Sachs Group Inc., Bank of New York Mellon Corp. and DBS Group Holdings Ltd. are among those expanding offerings to clients.

So, do you want to buy and hold or trade or do both?

My niece recently asked me if she should invest in crypto’s, I said to her, you are young and you should consider it as risk but a potential good investment long term. As soon as she did, the prices plunged.


Volatility is what an experienced CFD trader likes.

In terms of long-term investment, I truly do not know the direction, long term of the stocks I buy, but I have and will invest in traditional assets using my analysis, however with crypto’s they still have a shadow of uncertainty for me.

Cryptocurrencies are no doubt influenced by market sentiment. Market sentiment refers to the overall mindset of traders toward a particular asset. It is the attitude/feelings/instinct, of the traders and investors, therefore rising prices indicate bullish market sentiment, while falling prices indicate bearish market sentiment. With crypto’s the younger generation, born in this fast-paced technology surge have shown an avid interest. Cryptocurrencies becoming a popular topic causing a lot of sentiment and opinion with an audience perhaps not involved or interested in the traditional markets.

Pros & Cons

Leverage. If you trade Forex/CFD’s online, most brokers offer you leverage on the asset. Due to most regulatory bodies, this has been reduced for Cryptos because of its volatility, however it still makes them more affordable to trade them than out right buying them. Leverage is always a pro & con since leverage is a two-sided sword, great when it works in your favour but can also move against you quickly, especially with volatile assets.

Cryptocurrencies trade on multiple exchanges and exchange rates vary. Traders must ensure they understand which bitcoin exchange rates the forex broker will be using. Therefore, a transparent regulated broker is essential.

The asset has been associated with a system called pump and dump, frowned upon by the establishment. Because they are not centralised, they are available to trade 24/7 to trade, this can cause unexpected movement quickly. This has been attributed to just one of the reasons for their volatility.

Conclusion.

Many have been intrigued with the cryptocurrency emergence and it brings a lot of mixed emotions and sentiment as well as good and bad publicity.

No doubt the volatility can cause quick losses for inexperienced traders but potential good gains for others.

If you are interested, perhaps dabbling the online market will give you a better understanding of cryptocurrencies and helping you make an informed decision if you actually want to own some as well as trade them.

So, if you trade with a trusted broker and understand the volatility of the crypto’s, why not speculate?

If you are new to trading, the Brokers recommended on my blog offer demo accounts to test specific strategies before you trade for real.


Caveat emptor. Don't forget, Bitcoin hit $20k three years ago and crashed.


There are numerous strategies used by traders to capitalise on assets that exhibit high volatility and trust me Bitcoin is one. Since most of these strategies involve potentially unlimited losses or are quite complicated, they should only be used by expert traders who are well familiar with the risks of CFD trading. Beginners should stick to practicing on a demo until they are confident to speculate real capital.