Crypto: Tips to sustain in such a volatile market

[Brianna White]

Many of us refer crypto market as a risky and volatile market. The crypto industry size, measured by the market value of all coins, crossed the $1 trillion mark for the first time in Jan 2021 and hit a maximum of nearly $3 trillion in Nov 2021. Currently, it is $1.27 trillion as of 20 May 2022. This industry exhibits significant volatility. Sustaining in such a market requires a different skill set. As the industry is at a very nascent stage of development, higher volatility is a common phenomenon at this stage of growth. However, the number of crypto users is nearly 300 million, and per capita, crypto holding is currently less than $5. Despite being at a very nascent stage, this market has a much higher trading velocity, measured by trading volume divided by the market capitalization, compared with the equity market – more than seven in crypto compared with less than two in equity. The reason is the significant trading volume through automated trades. A large portion of the asset is managed electronically (through bots with user-defined trading range, target profit and loss criteria etc.)
Although volatility is very good for a class of market participants as it provides them opportunities to make money, for many, it may throw opportunities to hone their portfolio skills. As we all know, the basic of investment is understanding the underlying and the instrument. Equally important is to comprehend the risk ability and appetite; as a rule of thumb, we must go with the least of both.
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