Can I Trade Cryptocurrencies?
Yes, you can trade cryptocurrencies, but they can also be highly volatile and risky. Markets are open 24/7, and it’s the larger coins that offer more stability. You should focus on well-established cryptocurrencies for more predictable trading.
Decentralisation and Volatility
Cryptocurrencies, often called "crypto," represent a relatively new asset class that shares some similarities with traditional currencies. However, unlike conventional currencies that are tied to a specific country's economy, cryptocurrencies are digital assets and are typically independent of any single economy.
One of the biggest features of cryptocurrencies is their decentralisation. Cryptocurrencies are not controlled by any government or central bank, which sets them apart from traditional currencies.
This decentralisation theoretically prevents the authorities from manipulating the money supply to meet economic objectives. For example, central banks often adjust the supply of money through monetary policies to achieve certain economic goals, such as inflation control or stimulating growth.
However, central banks also play a stabilising role in traditional markets, something that cryptocurrencies currently lack. This absence of centralised oversight has led to some big price swings in the crypto markets. While some traders are attracted to these dramatic price fluctuations, they can pose big risks, making them less suitable for short-term trading approaches.
At the time of writing this, the leading cryptocurrencies are Bitcoin and Ethereum. Though still prone to volatility, both coins have grown significantly in terms of daily trading volume. This increase in size helps bring more stability to the market.
As these currencies continue to grow, we can expect their price movements to become more predictable, which reduces the influence of sudden, emotional trading surges, known as herd activity.
Are Cryptocurrencies Suitable for Trading?
However, cryptocurrency trading can have a number of advantages over traditional currency trading.
- The markets are open 24/7, including weekends. Traditional currency markets operate 24 hours a day during the week but close over the weekends.
- Cryptocurrencies are highly accessible. For example, accessing order flow data in traditional markets can be expensive or difficult, but this information is often more readily available in the cryptocurrency space.
That said, the volatility of cryptocurrencies can cause wide spreads, particularly for smaller coins. For this reason we’d recommend focusing on the largest and most established coins. While some smaller coins may show potential for long-term growth, day-to-day price movements are what matter most when trading.
If you want to trade cryptocurrencies, we’d recommend Bitcoin as it’s one of the most liquid and stable of the cryptocurrencies.