Bitcoin Volatility Trading

Buy and Sell Bitcoin Volatility

I watched a video news report about a guy who was broke and then made $5 million on Bitcoin and Crypto. He started with $90 and then went on to buy and sell on Bitcoin volatility (buy low, sell higher) until he amassed his fortune. He’s all smiles.

Why is Bitcoin such a topic for investors? Well, it’s a fascinating equity and might produce much better than anything you’ll find on the S&P, Dow Jones, or NASDAQ indexes.  Call it a slot machine or a wallet, or a 401k if you want, it’s drawing immense interest from Babyboomer to Millennials.

Keep in mind that although there’s euphoria now, there will be crypto hangover at some point. It’s speculative, but if you have extra money to gamble with, why not?

Unlike penny stocks or large caps (FAANGs) where accounts are needed, and commissions, fees, etc. paid, it’s easier to buy and sell this unregulated currency. And Bitcoin’s phenomenal rise in price has created many new millionaires. Institutional investors are into Bitcoin and crypto too, after avoiding like the plague. Nothing’s changed, just their minds.

Crypto has 5X the volatility of traditional asset classes. Volatility trades are ideally directionless, meaning there is a possibility of making money whether Bitcoin goes up or down — Benzinga

You’ve probably had a gander at the Bitcoin price forecast, and right now it seems very positive. A little easing the last couple months, but the upward predictions mean demand will be there. And then of course, the news events that scare small, mid and large money investors where sell offs result in yet another opportunity to buy the dip.

With big growth in the stock market seemingly over by 2022, investors are forced to hunt for single stocks to buy on the dip, in order to make a good return. With everyone expecting the end of this bull market sometime (stock market crash forecasts just haven’t happened), it keeps going forward. Still, the party will end, and everyone will have to choose their post pandemic stocks and hope for a good 5 year outlook for the economy.


Bitcoin Price Rising Again

After a drop in early May, BTC has scrambled back to $48,000. If you look at the BTC price history timeline, it’s looks like a very bumpy road, almost off road.

The most recent price boost came via Paypal who announced they would accept it as a payment type, and a real estate brokerage stated they may accept it for buying houses. Real estate is a very risky arena for such as volatile currency.

There are so many factors affecting cryptocurrency, it’s impossible to keep up to them. Threats can come from anywhere and few crypto supporters have really investigated the dangers of a shared digital currency in a hackable Internet universe. The face that governments don’t want a universal digital currency means crypto will fight for its gains.

BitCoin Volatity

Today, after El Salvador adopted bitcoin/crypto for use in their country, the price of BTC dropped almost $10,000 before rebounding quickly.  Today’s event clearly shows how speculative and volatile it is, and there’s no doubt Bitcoin traders who were ready for this very type of event, made a lot on the drop.

Big BTC drop during today's trading day.
Big BTC drop during today’s trading day. Screenshot courtesy of Trading View.

Bitcoin is Volatile Because:

  • speculative demand grows and wanes on news events (e.g., China cryptoc/business crackdowns)
  • no central bank control (no government to protect against sell offs or deliberate manipulation)
  • investors don’t like their other investment options right now so they buy crypto instead
  • limited supply (few new Bitcoin can’t be printed or made and less can be in mining activity going forward, and 18.7 million of the total 21 million Bitcoin are in circulation currently)
  • BTC value not rooted in earnings or real assets
  • Bitcoins security as a store of value is always in question
  • new technology and adherents in ecommerce improves demand and utility for BTC exchange
  • investors are often highly leveraged on their BTC purchases
  • forex trading companies and governments don’t like cryptocurrency

Big price drops will happen for sure. If the Republicans win the 2022 senate elections, which at this point is a certainty, that alone could send crypto falling and the US dollar rising.

The point is, that BTC price is affected by so many forces and events, and there’s no guarantee Bitcoin can stay competitive with Ethereum or other cryptocurrencies either.

It makes for intense volatility even on a day to day basis. So there’s room for crypto gamblers to make big earnings on Bitcoin trading.

The best way to look at Bitcoin may be as a temporary asset, one that could lose its value any second, overtaken by a better, more energy efficient cryptocurrency. Being sensitive to these momentary effects on price might help you time your trades better.

Buying and Selling Strategy in Bitcoin

Gurufocus has an interesting article on Bitcoin day trading and in it, Daly Young, Chief Product Officer at cryptocurrency derivatives exchange Bingbon said “There are several ways that traders can invest in crypto… there are effective techniques like copy trading that make this strategy easier to execute.

That’s right, using a service such as eToro, you can actually copy what the top Bitcoin traders are doing. It’s all part of the madness of digital investing.

Bitcoin Volatility History Timeline Chart
Screenshot courtesy of https://www.buybitcoinworldwide.com/volatility-index/

How Can You Make Money Trading Volatility?

Here’s a few tactics from Benzinga about how to leverage Bitcoin volatility:

  1. Arbitrage – BTC is traded in many markets, and one market may have a vastly different price. Buy in the lower priced market and sell in the higher priced market.
  2. Bitcoin Options – buy a call or put option at the same time for the same strike price and expiration date. When prices change you sell them both at the same time.
  3. Scalping – trade before or after events that are changing the price before the full market sentiment has hit Bitcoin.
    Volatility Trading – buy and sell manually, or use a trading bot to sell after negative news events and buy immediately after positive news events – use speed to beat all other traders.
  4. High frequency Trading – using trading bots to trade very frequently, sometimes up to 20 trades per minute to get an advantage (normally used by big money investors with sophisticated trading tools)
  5. Range Trading – Bitcoin and other currencies can sometimes be manipulated by billionaires and others who will move the price up or down from its normal trading range. You can buy or sell when the big movers push the price up or down.

There is more volatility in other cryptocurrencies and this will test your skill and confidence. If this is just “gambling money” and you can take the loss, you might try it.

You can open up a cryptocurrency trading account for just $200 and it might be the right way to go about managing your Bitcoin volatility trading strategy. Research Coinbase, Binance, and Litecoin (which Walmart is ready to accept as payment).

Good luck trading Bitcoin like a Day Trader.

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