Effect of market impact on cryptocurrency trading results
Cryptocurrencies have gained popularity in recent years and their prices are known to be very unstable. One of the key factors that influence the trading of cryptocurrencies is market opinion. In this article, we explore how market opinion affects the cryptocurrency trade and discuss its effects on investment decisions.
What is the market opinion of the market?
Market feelings refer to investors’ collective attitude or atmosphere to a particular stock, bond or asset class. It is influenced by different factors such as financial indicators, news and investors’ opinions. With cryptocurrencies, market opinion can be classified into three types:
- Speculative Opinion : Investors who buy cryptocurrencies, hoping to get fast winnings from price fluctuations.
- Institutional opinion : Institutional investors such as Hedge Funds, Pension Funds and Family Offices, which invest in or participate in cryptocurrency diversification.
- Mainstream feelings : Individual investors looking for short -term profits or speculating in the cryptocurrency market.
How market opinion affects trade results
Markets can have a significant impact on the trading of cryptocurrencies in many ways:
- Price Volatility : The market affects prices by strengthening or damping them. For example, the opinion of the venous market (eg sales signal) can lead to a strong drop in price, while a rising market opinion (eg purchasing signal) can lead to a rapid price increase.
- Risk tolerance : Market feelings affect investors’ risk capacity. When emotions are negative, investors may be necessary and less likely to invest in cryptocurrencies, leading to lower trading volumes and prices.
- Trading Strategy
: The market affects the investment decisions made by merchants. For example, declining market opinion can lead to merchants to sell their position, while rising market opinions can cause them to buy them back on the market.
- Diversification of portfolio : Market can affect portfolio diversification. When investors are optimistic about cryptocurrency, they may distribute more capital to these assets, which increases trading volumes and prices.
Case Studies: How do market opinions affect trading results
Many case studies show how market opinions affect the results of cryptocurrencies trade:
- Bitcoin (BTC) : In 2016, the price of Bitcoin rose from about $ 600 to over $ 19,000 due to a speculative feeling that increased investors as alternative investments.
- Ethereum (ETH) : In 2017, the price of Ethereum rose from about $ 200 to over $ 4,900 and was influenced by an institutional opinion, with high profile investment attempts such as Circle and Andreessen Horowitz, support the project.
Market relief risks
In order to alleviate the opinions of the cryptocurrency market, merchants can use various strategies:
- Diversification : Apply investment between multiple cryptocurrencies to reduce the exposure of any property.
- Station size dimensioning : Limit location sizes to control risks and maintain a consistent investment study.
- Risk Management : Remember STOP loss orders, restrict orders or other risk management techniques to control losses.
- Investment Studies : Develop an investment study that takes into account market opinion and regulate trade strategies in line with trade strategies.
conclusion
The Market Minds play an important role in the design of trading results in cryptocurrency. Although speculative opinion can lead to rapid changes in prices, institutional opinion can affect long -term trends.