EDITORIAL – “Cryptocurrency Volatility” by David Sharper

EDITORIAL – “Cryptocurrency Volatility” by David Sharper

 

Weekly Editorial

 

Bitcoin and cryptocurrencies, in general, have been especially volatile in recent months. Little known cryptocurrencies (altcoins) are notching record gains. An example is ChainCoin, up over 939% in the past week.

The astounding gains which are now open to investors from all backgrounds bring appeal to cryptocurrencies. Media outlets such as Forbes, CNBC, Fortune, and more are now covering Bitcoin and other cryptocurrencies.

Other people started investing in Bitcoin during its infancy, these people were largely motivated by the allure of a decentralized money system. A decentralized money system is one which is not controlled by any one government or company.

For people who believe and want such a system, Bitcoin was the first and maybe the only lasting and successful option. You may be asking yourself, what does the average person have to gain from Bitcoin?

People such as refugees and international business people can take advantage of this system but, essentially, it was created for the average Joe. Many of the people who first started working on Bitcoin wanted it to be anonymous and unable to be traced by any single government.

Cryptocurrencies offer the average person the ability to gain financial freedom, a new choice of payment, and a new way to transfer money instantly without the permission of any single jurisdiction or corporation.

Bitcoin was built to do that and, now, it does not. That is why altcoins are in existence, to correct parts of Bitcoin which certain people dislike. Whether through faster transaction times or through more anonymity and decentralization, other cryptocurrencies fill gaps that Bitcoin does not cover.
An example of anonymity is ZCash, a completely anonymous altcoin. See the chart below.

zcash EDITORIAL - "Cryptocurrency Volatility" by David Sharper

 

An example of a decentralized storage system which is supposedly very cheap is SiaCoin. See the chart below.

 

siacoin EDITORIAL - "Cryptocurrency Volatility" by David Sharper

This is where the average person comes in. The average person could have purchased $20.00 worth of ChainCoin last week (this week’s chart below). That would be worth $207.80, only a week later. Those are gains that can only be called astronomical.

chaincoin EDITORIAL - "Cryptocurrency Volatility" by David Sharper

Also, see today’s biggest percentage gainer. Note that this is a one day chart. Someone could have hypothetically bought and sold within the same day, with a purchase price of $1.00 and a sale price of $3.00. Tripling your money in one day isn’t a terrible days work.

 

rublebit EDITORIAL - "Cryptocurrency Volatility" by David Sharper

 

The fact that the average person could have taken 20.00 and made this money is just one example of the potential this new market has. Other examples of gains include coins that have risen enough overnight to turn 20.00 in 5,000.00.

These gains are why cryptocurrencies shouldn’t be taken lightly and why the average person should take some time to educate themselves on what could be the world’s next payment system.

That is what this editorial is for, once a week I will write about crypto currencies, cryptocurrency news, attempt to identify scams, and more.

I will usually be putting this small disclaimer at the end of my article but since this is the first time I am writing for this site I will provide my small disclaimer here. I’m not a lawyer. What I’m trying to say is, I’m not telling you what you should and shouldn’t do, and don’t assume I am. “What I write is not financial advice as I am not licensed in any way or in any jurisdiction. As such, what I write in this column and anywhere else is solely for learning and entertainment only. My mission, instead of advising, is to attempt to inform you, the average person. Also, I will attempt to provide an interesting source for Bitcoin enthusiasts who want to reinforce their knowledge. I look forward to shedding light on the latest in a space which is constantly changing and growing.”

After this rather lengthy introduction, I would like to delve into my first topic.

The Volatility of the Cryptocurrency Market

Cryptocurrencies have been volatile since their inception. The biggest cryptocurrency player, by market cap and age, is Bitcoin. Many consider it the “patriarch” of all cryptocurrency solutions.

Bitcoin has been extremely volatile in 2017.  Let’s go through a basic month to month transitional volatility chart of Bitcoin and another cryptocurrency which is second by market cap, Ethereum.

January 1st, 2017

Bitcoin crossed $1,000.00 for the first time since January 2014 where it was as high as $1,023.00. Its all time high was $1,216.70, set in 2013. Bitcoin closed at 998.33 that day.

Ethereum opened at $7.98 and closed at $8.17. At this point in Ethereum’s lifetime, its history and rise are just beginning.

February 1st, 2017

Bitcoin traded at around $971.00 amid regulatory concerns in China. It closed at around $989.00.

Ethereum opened at $10.74 and closed at $10.73. At this point, it is still rising steadily.

March 1st, 2017

Bitcoin rebounded and traded at about $1,180.00 according to Business Insider, ahead of the SEC decision on whether or not it would approve a Bitcoin etf. It closed at about $1,222.00.

Ethereum opened at $15.85 and closed at $17.35. In the middle of last month companies including Microsoft and J.P. Morgan got behind Ethereum and its technology.

April 1st, 2017
Bitcoin trading opened at about $1071.71 and closed at about $1080.50 amid implementation of a law that recognized it as a currency in Japan.

Ethereum opened at 50.03 and closed at 50.70. This was largely due to the continuation of the buying/investing  alliance of companies Microsoft, J.P. Morgan, and more.

May 1st, 2017

Bitcoin, according to Market Insider, was up to 1,421.06. It hit an all time high earlier of $1456.35. This was considered by many to be due to the reconsidering of one of the Bitcoin etfs previously up for decision in March.

Ethereum opened at 79.32 and closed at 76.60. From last month to this month Ethereum skyrocketed due to speculation about the SEC allowing an Ethereum fund, hype about cryptocurrencies in general, and due to ethereum’s success.

June 1st, 2017

Bitcoin opened at 2,288.33 and closed at 2,407.00. This was due to many people seeing Bitcoin in the news and starting to invest and speculate on it. Also, analysts and others saw the trend and it began to show. It actually surged past 3,000.00 before retreating back down.

Ethereum opened at 230.89 and closed at 222.24. May was a great month for Ethereum. There were hype and speculation and a large amount of attention on cryptocurrencies in general, but especially on Ethereum due to its “insanely” quick rise.

July 1st, 2017

On May 10th Australia announced that Bitcoin would become “just like money” according to Cointelagraph effective July 1st 2017. Also, Australia would no longer “double tax” Bitcoin. Bitcoin opened at $2,492.60 and closed at 2,434.55.

Ethereum opened at 293.25 and closed at 274.60. Coinbase, one of the most prevalent Bitcoin and Ethereum exchanges, dealt with a flash crash which temporarily brought Ethereum to 10.00 and possibly below.

The reason I wrote this timeline is that I want you to see how the top three cryptocurrencies trade. They are volatile but they have had immense gains month to month, year to year, and especially since each one’s inception. Other cryptocurrencies, which I will detail in other posts, trade in a similar way as these do.
The huge volatility that my chart displays

The huge volatility that my chart displays are unheard of when it comes to stocks. For institutional investors, a lack of volatility is a plus for long term wealth creation. But, the average person can create wealth in a much quicker way with cryptocurrencies than they could with stocks, bonds, et al.

If this volatility is exploited correctly then there is an opportunity for extremely large profit. Therefore, volatility can and will benefit speculators and investors who take a methodical and logical approach to analyzing in and investing in cryptocurrencies. On the other hand, investors and speculators who don’t use volatility correctly can and will get burned, possibly losing not only their own money but also money that they don’t have. In this case, investors and speculators who just speculate and fall on the wrong side of volatility can lose. Furthermore, for this group of people, margin calls are an added frustration and worry. This occurred during the Ethereum flash crash in June 2017. People who purchased Ethereum on margin got margin called (companies forced people who borrowed money from them to sell their positions at a loss) even when Ethereum went back to its pre flash crash levels.

Although I have introduced volatility in these larger more established coins I have not yet finished delving into the volatility of small coins.

Take a look at a few charts:

newyorkcoin EDITORIAL - "Cryptocurrency Volatility" by David Sharper

 

Take a look at New York Coin. The volatility in this coin is extremely interesting. I have seen newsletters use this particular coin as an example of one where people could have made quick daily or weekly gains.

monerocharts EDITORIAL - "Cryptocurrency Volatility" by David Sharper

 

Take a look at the Monero chart. The volatility in the last year is large. A margin trader could easily lose out on one of these quick falls. A savvy investor could make some money.

Now take a look at two more charts.

bitcoincharts EDITORIAL - "Cryptocurrency Volatility" by David Sharper

 

Bitcoin has had a reasonably steady uptick from July 2015 until early 2017. Then, the cryptocurrency boom began and it started spiking up, albeit with periods of large corrections. Now it is starting to tick down a bit.

ethereumcharts EDITORIAL - "Cryptocurrency Volatility" by David Sharper

The volatility in crypto currencies is expensive. Ethereum, though, was steadily trending upward and generally has for awhile, up until recently. The recent chart versus Bitcoin is similar. Both rose when cryptocurrencies started gaining notoriety and fell recently with the sell-off. Ethereum rose more, percentage wise, and fell more percentage wise as well. It’s important to remember that Ethereum was around 8-10.00 at the beginning of 2017.

There is one last part of crypto currencies that can potentially create multiple waves of volatility throughout multiple cryptocurrencies and cryptocurrency exchanges. This process, which isn’t usually thought of in the way I am presenting it, is called the Initial Coin Offering or ICO. Much like stocks, this is used by new tokens during their launches. ICO’s set a value and market cap for a new cryptocurrency altcoin.

By themselves, ICO’s don’t seem like a big source of volatility but they are.

Ethereum is not only a crypto currency is a revolutionary technology which allows other altcoins to run on its technology, known as a block chain. Bitcoin also has a block chain. These ICO’s, when successful, can cause large sell offs of Bitcoin and Ethereum by people who were previously holding their profits. Furthermore, when new ICO’s size and traffic are underestimated, the Ethereum blockchain clogs up causing delays which can cause panic and sell offs by less sophisticated investors and by speculators who temporarily lose volatility and liquidity.

The point of these charts and examples are to illustrate one point. That point is that cryptocurrencies are volatile and when uninformed people make speculative decisions with other people’s money there can be disastrous consequences. When people do the inverse there is potential for the creation of generational wealth to occur.

One way that many people profit through volatility and ever changing prices is through a strategy called arbitrage. Basically, people buy and sell cryptocurrencies on different exchanges and then resell them on exchanges which list Bitcoin’s price is higher than the exchange that they bought from. This can lead to potentially instant profits but it is risky if there’s a quick drop in price.

In conclusion, volatility is one of the largest components of why cryptocurrencies aren’t being universally accepted faster than they are currently. Their volatility can scare business owners and would be investors in cryptocurrencies.

Strides are being made every single day in order to grow the prevalence of and usability of crypto currencies, not only Bitcoin and Ethereum but also a wide range of altcoins as well.

Now, companies such as Overstock.com, the Dish Network, Intuit, Microsoft, and PayPal accept Bitcoin. Also, there are ways in which one can purchase a luxury car with Bitcoin and people have purchased houses as well.

Thank You for Reading,

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About Article Author

David Sharper
David Sharper

David Sharper is a Bitcoin enthusiast well versed in finance, social media, politics, and cryptocurrencies. This unique blend of experiences and areas enables David to take a unique approach to cryptocurrencies. As a cryptocurrency consultant and author David has worked with clients looking to invest in, learn about, and launch cryptocurrencies and cryptocurrency businesses. Areas of knowledge include the mining of cryptocurrencies, the basic hardware of crypto currencies, as well as crypto currencies storage and wallet solutions. He is also versed in cryptocurrency exchanges and where cryptocurrencies can be purchased and traded. His goal is to expose Bitcoin and its predecessors to those who are seeking to learn.

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