The crypto industry is known far and wide for its volatility, which many officials see as a major problem. On the other hand, experienced traders do not view it as such, at all. Instead, they see it as an opportunity. Of course, there are different ways of approaching the matter, with some traders opting to constantly oversee the market and buy and sell in order to exploit even a smallest price shift, while others focus on creating expert predictions, and then use derivatives to make profit.
This time I reached Robin Janaway and David Fabiyi, the co-founders of the prediction platform, Trade Fighter, to get insights about crypto volatility and its potential to create earning opportunities.
1) What are your thoughts on volatility? Is it a blessing or a curse?
Volatility is totally necessary, price movement is present in all markets otherwise traders, bankers, futures and the like would not exist. In crypto, it allows the creation of a realistic marketplace that will eventually allow that asset to find its true price. Whether it is caused by impending regulations or the arrival of further institutional money and involvement, we see it as a blessing. The volatility is what is allowing people the opportunity to make money and democratizing the capability for everyone to be able to study, learn and make gains.
2) Do you think that crypto prices will become less volatile in time, or will the lack of a real-world underlying asset forever keep the prices shifting so strongly?
The wild oscillations we see in crypto value can be easily attributed to the fact the space is still at its infant stage. The entire valuation of the crypto markets is a fraction of the worth of the various stock markets.
As time continues we believe the market will be less volatile driven by the compounding of capital, increase in regulation and better surveillance of the market which eventually will lead to greater stability, with the larger market cap crypto assets we are already (in general) seeing less swings in comparison to alt coins for example and this will continue as the market matures and these assets find their true values.
3) What is the reason that volatility is so big for certain coins, like BTC and ETH?
As we partly mentioned earlier, the crypto space is still new and we strongly believe that when a new technology comes out, it takes a relatively long time for that technology to both evolve and find a counterpoint in the heart of the masses.
Both assets are both traditionally and fundamentally correlated to each other and because of this, where BTC goes dictates the rest of the alt coins which tend to have even greater volatility.
4) How do you manage crypto volatility?
By paying close attention to detail and comprehensive analysis of the market by examining both internal and external forces that affect the price.
There are many models used in BTC prediction and the relationship between BTC and ETH is well documented, but through analysis of the limited historical data, you can begin to get an idea of certain factors that affect the prices and when those occur, a simple one is the BTC halving that happens every four years, this is where the reward for mining BTC transactions is cut in half and has a dramatic effect on the price.
5) Would you say that derivatives trading is better than buying coins directly?
This is a question of opinion and I think we sit in the middle. Trading is a talent and each trader has a specific preference based on what works for them / their trading objectives.. Some have a talent for spotting arbitrage and some have talent for understanding company fundamentals, both require a different approach and huge gains can be realized in both scenarios.
6) Do you think that volatility is preventing crypto from progressing?
Not at all. Volatility is why people come to this space because it allows for bigger profits in a relatively shorter period of time, it is the democratization of being able to invest into assets that is the backbone of this space and has led the institutions to follow these early adopters into this market.
Retail investors have opportunities that were privy only to the elites, this volatility is allowing people the opportunity to make money whether a short-term trading mindset or a long-term investment strategy the space does not discriminate and that underpins the exciting amount of new projects and development of the space.
7) Do you think that authorities are using volatility as an excuse to warn people against crypto, or do they see it as a genuine problem?
The authorities are there to guide and protect the average investor. Volatility is essentially a risk to the investor and if one does not understand it, it will result in loss of capital. Financial regulators understand that volatility is part of the game so we don't think they see it as a problem - after all without price movement there would be no investment banks, no hedge funds and no traders - the essence is still the same, the asset class is all that has changed.
8) What does Bitcoin volatility mean for other assets?
Well since the price of BTC is correlated to most of the other alternative assets which historicals have shown to be the case.
When BTC moves up or down, other assets either move alongside it such as ETH or inversely such as major alts - which tend to increase in price once people take profits from their BTC positions (causing BTC price to drop) and invest it into the alt coins, and so on.
9) What is the best way, in your opinion, for both novices and experts to engage in price speculation?
I think this is why we created Trade Fighter, the purpose of which is to allow any level of trading experience to play and predict in a simple, clear way so that having studied your graphs and done your research you are able to try your skills with as little as $1.
It is this introduction that allows a wannabe trader to hone their skills with a minimal downside risk.
10) Is using volatility worth the risk?
With risk comes reward. If you want to become good at anything there is always risk involved and so long as you are in a situation where you are able to limit your risk and build up your knowledge of what you are doing then we believe it can be extremely rewarding, Trade Fighter allows you to dip your toe in the whale pool without having to dive right in, something we believe is vital in both protecting our community and giving them the opportunity to learn and develop as Trade Fighter Traders.
Create your free account to unlock your custom reading experience.