Adapting to different market conditions is one of the key things successful cryptocurrency traders and investors manage to do constantly. Although any given crypto could have a huge potential for growth, timing the moment when it’s the right time to buy (or sell) will determine the level of profitability as well as how fast the price will reach the target. To do that, one should be able to spot what kind of market he/she is dealing with and adjust the strategy accordingly.
At first glance, the cryptocurrency market is just a series of periods when volatility gets compressed only to see it spiking again, generated by unexpected events or technical developments. When volatility moves south, daily ranges are smaller, breakouts below/above key support/resistance levels don’t occur and the prices are fluctuating in tight ranges. This is not the time to invest in the long run, because the price at some point in the future, could spike in any direction. Cryptocurrency traders/investors should have a short-term approach and in case they already have long-term exposure, it should be adjusted based on how the market conditions change.
Volatility will start to rise again and when it happens, that’s when long-term positions should be initiated. Noticing the direction of the price when volatility is increasing will show us where valuations are likely headed. Increased volatility comes with its challenges and it possible that a conservative approach might be the best choice sometimes.
Without volatility it would be impossible to make profits, so we must learn how to deal with it. Having a diversified portfolio is one of the best ways to deal with a volatile market since that will mean you don’t have “all eggs in one basket”.
Analyzing changes in the price action structure
Even though cryptocurrency fundamentals matter in the long, analyzing the price action for each cryptocurrency will provide more accuracy and an in-depth perspective over the prospects. Recently, Bitcoin was unable to break above $10,000 and that communicates sellers emerge strongly around that area.
Cryptocurrencies are also vulnerable to COVID-19 uncertainty and each time market valuations will dip below key support/resistance levels on negative headlines, it could mark a change in the bigger picture. Markets participants are constantly monitoring charts and there’s no point in ignoring them. The technical analysis had proven to work, in combination with other factors, so we advise you to keep track of charts if you want to not get by surprise when technical change.