Trading the Cryptocurrencies Space..
Cryptocurrency, blockchain, bitcoin, ethereum, Ripple. Whatever you want to call it, it’s not going away any time soon.
Because of its popularity, cryptocurrency has captured the interest of many market traders. It is something that many traders are currently experimenting with, or plan to trade in the future. And while there can be some large gains, there is also risk. In Q4 2017 and Q1 2018 we saw 1,000% gains and 90% declines in certain coins. The volatility of cryptocurrency means that short-term traders need to know what they’re getting into before jumping in on this trend. Let’s look at some pros and cons of trading in cryptocurrency.
The market is in its early stages, growing and inefficient. This creates trading opportunities in the sector. If you trade a large cap stock, the bid offer spread is a penny wide and priced the same on all exchanges. By contrast, in Crypto land, the fact that the space is new creates opportunity to arbitrage between different exchanges and across products.
The market is less efficient than traditional equity, currency, or commodity markets at the moment. There is not as much information on all products and new coins that are constantly coming to the market which creates opportunity.
Because the market is still young, it can be hard to determine which coins will be the ones to stick around. The Technology seems here to stay but that does not mean every coin is here to stay.
I mentioned the market being young and less liquid above as a “Pro” but that can also be a “con”. When you want to get out or if the market starts to drop and you NEED to get out there might not be liquidity. You cannot rely on a stop order for protection as you might be able to in a liquid stock or futures contracts. If a new less liquid coin starts to decline rapidly you might not be able to get out and if you do, it might be with significant slippage.
What exactly does this mean for the future of short-term trading crypto currency? Despite the decline since January 2018 we believe the space is here to stay. The lack of liquidity, and information will continue to keep volatility elevated. We have no current view on the future price direction in the space but we discuss technical and fundamental information along with update our customers with breaking news and research on the topic in our live stream each day. We also will feature video interviews with experts in the space regularly.